Citing “uncertainty overlaying the market over the past week from erupting trade wars,” analyst Anne Ling raised the prospect of retaliation by China against U.S. casino companies operating in Macau. She posed the possibility in an April 7 Jefferies Equity Research investor note.
Ling concluded that U.S.-leased assets and capital bases in China faced little hazard, even as their stocks encounter short-term pressure on both the Wall Street and Hong Kong exchanges.
“From a simplistic perspective, the assets and capital base should endure the uncertainty ahead, in our view,” Ling elaborated. Her top stock pick in the revised outlook was Galaxy Entertainment. She cited its new Andaz resort and other assets as determining factors.
Former favorite Las Vegas Sands was already down prior to recent tariff announcements, due to an influx of new capacity at its Londoner megaresort at a time of modest Macanese growth. Promotional competition was characterized as mild, with Wynn Resorts and MGM Resorts International “operating solidly” in Macau.
Overall, Ling advised, “investors are pricing in both a meaningful recession and concerns over tariff retribution, which compresses multiples for the time being.”
She warned that reciprocal tariffs, an uncertain economy, and downward-moving levels of credit and liquidity could have harmful impacts on both the mass market and VIP play over the short term. “Whether there could be any impact to operations or regulations or capital allocation due to the tariffs also becomes a more prominent question,” Ling added.
Macau is coming off a flat March, with gambling revenue up only 0.8 percent (to $2.5 billion). This was slightly better than what Macanese regulators expected by lower than Jeffries’ 3.3 percent growth expectation.
Ling blamed a Chinese crackdown on money exchanges for a sharp drop in April gambling win. For the first six days of the month, it was down eight percent, averaging $85.3 million a day. Mass-market play dropped as much as eight percent from March, while VIP action was down by six to seven percent.
