The broader universe of US-listed gaming equities is struggling Tuesday, but those with Macau exposure are standing out after the special administrative region (SAR) halted its coronavirus quarantine policy applicable to travelers arriving from mainland China.
During Asia’s Tuesday trading session, Sands China traded as high as 10 percent while MGM China and Wynn Macau flirted with double-digit gains on news of the quarantine protocol being lifted. Some of that momentum is carrying over to US trading today with Melco Resorts & Entertainment (NASDAQ:MLCO) leading the way with a gain of nearly six percent in midday trading.
This probably signals that China is increasingly comfortable on easing travel restrictions after the Spring Festival and, hence, this is directionally positive,” said JPMorgan analysts in a note to clients. “Similarly, we’d expect cross-provincial travel restrictions (or discouragement, to be more exact) to be gradually removed, which in turn should help improve sentiment/confidence on long-haul and cross-border travels.”
Las Vegas Sands (NYSE:LVS) — the largest Macau operator — is higher by 3.21 percent while MGM Resorts International (NYSE:MGM) and Wynn Resorts (NASDAQ:WYNN) are both up more than four percent. Those three companies and Melco are four of the six Macau concessionaires and the only ones with listings on major US exchanges.
Good Time to End Macau Quarantine
The SAR’s decision to scrap the healthcare protocols applied to Chinese visitors comes amid budding signs of a rebound in the world’s largest casino center.
Visitation to the former Portuguese colony surged during the latter stages of the recent Chinese Lunar New Year festivities, prompting analysts to highlight some encouraging data. Bernstein and JPMorgan estimate that gross gaming revenue (GGR) in Macau was $726 million, or $35 million a day, through the first 21 days of February. However, the average daily rate accelerated to $58 million over the past week, assisted by higher win rates from both mass market and VIP gamblers.
Volumes among high-end players are forecast to rise five percent from January. That’s beneficial to operators such as Melco and Wynn, which have heavily premium mass and VIP client bases.
“Demand acceleration itself was well expected, but this is a strong print that exceeded our and the market’s expectations,” said the JPMorgan analysts in reference to momentum accrued towards the end of the Chinese New Year celebration.
Why It’s Important
Mainland China is by far Macau’s most vital feeder market. Last month, 556,765 visitors arrived to the SAR, of which 496,157 hailed from the mainland. More than 432,000 of that group entered Macau through border crossings, indicating many residents of the mainland remain reluctant to fly or travel by boat in the wake of the pandemic.
However, Beijing recently upgraded several regions to “low risk” from “high” or “medium”, signaling it’s confident the world’s largest country has COVID-19 under control.
The next step in the Macau recovery process is restoration of the e-visa process for the Individual Visit Scheme (IVS). Of the 556,765 January visitors, just 174,554 arrived under IVS permits, confirming that in-person application and long approval times are hindering the gaming hub’s rebound.
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