Macau October Visitation Trending Lower, Analyst Calls Golden Week Start ‘Disappointing’

Posted on: October 5, 2020, 11:42h. 

Last updated on: October 5, 2020, 01:56h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Macau tourist traffic is likely to falter again this month because of a rough start to the highly anticipated Golden Week festival, among other factors.

Macau tourists
Tourists celebrate Lunar New Year in Macau last year. Visits for Golden Week this year are off, stoking concern about the economic recovery there. (Image: Getty Images)

In a note to clients today, Roth Capital analyst David Bain said the world’s largest gaming center still faces multiple headwinds on the road to recovery from the COVID-19 pandemic while calling the start of Golden Week “disappointing.”

While Golden Week expectations were finally reined in over the past two weeks, we believe days one through four of October visitation are disappointing, even amongst lowered forecasts,” said the analyst. “October consensus gross gaming revenue (GGR) expectations for -71 percent are likely to be moderated — again.”

That ominous outlook comes just days after the Macau Gaming Inspection and Coordination Bureau said September GGR slumped 90 percent. But that was a marked month-over-month increase, stoking hopes that Golden Week would set the stage for a fourth-quarter rebound.

It appears that resurgence will have to wait because the Macau Government Tourism Office (MGTO) said visitation through the first four days of the holiday is off 86.2 percent compared to last year.

Same Old Song

The gaming mecca’s recovery efforts are being hindered by issues concessionaires and investors are becoming all too familiar with this year, including coronavirus testing logistics and sluggish processing of tourist visas.

Bain said the visitation dearth is particularly concerning because travel around mainland China is picking up. Would-be Macau tourists have to apply for individual visit scheme (IVS) visas, which the mainland reauthorized on Sept. 23. But the processing of those applications takes a week to 10 days.

The analyst adds IVS processing efficiency and COVID-19 testing may be short-term hurdles that investors can deal with. But beneath the surface, there’s more to the story. Those “under the hood” issues include VIP liquidity, slack play and visits by high rollers, and chip purchases and redemptions denominated in Hong Kong dollars.

Fourteen-day quarantines still apply to travelers arriving to Macau from Hong Kong, a policy that all but eliminates travel between the two special administrative regions (SAR). Hong Kong visitors accounted for 15 percent of the casino hub’s GGR last year.

Favors Melco

Bain covers four Macau operators: Las Vegas Sands (NYSE:LVS), Melco Resorts & Entertainment (NASDAQ:MCLO), MGM Resorts International (NYSE:MGM), and Wynn Resorts (NASDAQ:WYNN). However, the analyst is tepid on the three US-based gaming companies while favoring Melco.

“We see MLCO as a continued market share gainer and de-risked versus US-headquartered Macau peers in the current environment, with a severe stock multiple disconnect to boot,” said the Roth Capital analyst.

He has a “buy” rating on the City of Dreams operator. Conversely, he’s most concerned about Wynn, citing the company’s leverage to VIP trends and lower exposure to the Cotai Strip. Bain has a “neutral” grade on the Wynn Palace operator.