Macau exposure now “a negative” for U.S. companies, Jefferies analyst says

Tuesday, November 19, 2024 3:12 PM
Photo:  By Kennyieong., CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=12403795
  • David McKee, CDC Gaming

Investors in Macau-facing casino companies received some good news November 18. Jefferies Equity Research analyst David Katz reported that the Chinese enclave’s economic outlook is improving this month and that its casino industry is expected to reach 82 percent of pre-COVID business levels.

Higher daily rates of play by both high rollers and mass-market customers were credited with driving the positive sentiment.

Macau casinos gambling revenue rose significantly last week, going from an early November average of $71 million per day to $78.6 million daily. Looking ahead, Katz projected monthly revenue for November of $2.2 billion to $2.3 billion. The previous Jefferies’ range was $2.1 billion to $2.2 billion.

The office of Macau’s chief executive recently issued a 2025 casino-revenue prediction of $29.9 billion for the full year. That would be an 11 percent increase over this year and a 31 percent jump from 2023.

Katz forecast that those numbers could go still higher, if continued governmental economic-stimulus measures ease macroeconomic pressures. “However, at the moment, we believe visibility remains low and given recent results in the U.S. election, we view exposure to Macau as negative,” especially for Wynn Resorts and Las Vegas Sands.

Citing Galaxy Entertainment’s market share and cash on hand, Katz named it his best pick of the Macau-based gaming stocks. Despite his concerns about changes to U.S./China policy, he continued to like Sands, both for its hotel-room upgrades in Macau and its expanding Marina Bay Sands in “the stronger Singapore market, which could be a positive setup for 2025.”

Katz ended by cautioning that “on the U.S. side, political rhetoric could drive increased volatility” in shares.