Stocks of four publicly traded Macau casino concessionaires trended sharply upward on the Dow Jones and Nasdaq this morning upon news that the Macanese government was lifting travel restrictions to the enclave.
Melco Resorts & Entertainment (ticker symbol: MLCO) vaulted 33 percent on the Nasdaq, while Las Vegas Sands (LVS) gained 12 percent on the Dow Jones. Other Dow Jones gainers benefiting from the new regimen in China were MGM Resorts International (MGM, up three percent) and Wynn Resorts (WYNN, lifted 14 percent).
On Sunday, the Macanese government announced that the regime in Beijing would resume e-visas and group tours to Macau, possibly as early as November.
“In our view, this is the first meaningful travel policy/travel mobility enhancing action since the outbreak of COVID-19,” reported JP Morgan analyst Joseph Greff, who characterized it as “the beginning of the beginning of the recovery. Moreover,” Greff continued, “this positive development isn’t something that the industry or investors were expecting, so we look at this policy news as sizable positive for a sector that has been viewed as very tough to invest in.”
Discouraging factors have included “a miserable near-term operating environment” in which gaming revenues were a tenth the size of those pre-pandemic and the lack of clarity as to when freedom of movement to Macau would return.
The economic impact of the policy change should be substantial, especially as it reopens Guangdong Province, which accounts for 50 percent of Macau’s gross gaming revenue. Zhejiang, Jiangsu, Fujian, and Shanghai are also targeted for an early resumption of travel.
“Probably the most important thing to read from this policy shift in our view is that it signals that it’s fine for Mainland Chinese to travel to Macau,” Greff remarked.
That said, he doesn’t expect a sharp upward trajectory. He thinks that not until 2024 will Macau be at 80 or 90 percent of pre-pandemic revenue levels.
“In short, it gives us greater hope for a staggered recovery.” Greff added that there would be “fits and starts” due to any resurgences of COVID (and the Chinese government’s tendency to clamp down hard on surges). However, “This news has to be a positive for a sector that has experienced massive multi-year underperformance where sentiment can be described as negative to apathetic.”
Of all the Vegas-based beneficiaries of the policy shift, Greff likes Sands the best and not only for the direct benefit in Macau. He expects Marina Bay Sands in Singapore to pick up as well, “a tourism market that is still early in seeing a lift in its internationally sourced visitation (just six months in). We’d expect incremental capital return as both of its markets experience a recovery (something that should distinguish LVS from the others).”