Casino revenues projected to slow down

Industry insiders foresee that gross gaming revenue (GGR) will face a slight deceleration, estimating a range between MOP540 million and MOP590 million per day. The full-month GGR is anticipated to reach between MOP17.4 billion and MOP18.5 billion.

This is equivalent to 71% of the January 2019 median, consistent with trends observed in the second half of the year of 2023.

Macau’s average daily GGR for the first seven days of the year reached MOP630 million, up from MOP599 million per day in December last year, according to Jefferies Financial Group as cited in AAStocks Financial News.

The increase is attributed to strong traffic during New Year’s Eve, with the SAR reporting a post-Covid record of 175,000 tourist arrivals on Dec. 31.

In total, the three-day New Year’s holiday recorded 399,100 visitors.

Despite this promising start, the broker observed that casinos and shopping centres were relatively quiet. Restaurants and similar establishments, however, were busier.

On-site inspections by the broker highlighted quieter casinos with fewer gamblers and shorter queues at high-end luxury brand outlets like Channel, Hermes and Louis Vuitton.

Notably, ferry trips between Hong Kong and Macau were not fully booked, and were more popular with elderly passengers, the report added.

Despite this, the main casinos at Galaxy Macau and The Venetian remained busy, while the Grand Lisboa Palace witnessed an increase in visitors, Jefferies observed.

Expectations remain high for the sector over the upcoming Chinese New Year, which is traditionally one of the busiest holidays in the mainland and Macau. The holiday is anticipated to boost arrivals and revenues.

Despite signs of gradual recovery within the sector, concerns persist regarding mainland China’s slowing economic rebound and unfavourable macroeconomic factors that are expected to have a lingering effect on earnings.

Consequently, Jeffries projects that Macau casino stocks will continue to underperform the market until mainland economic growth concerns subside.

“New normal” in 2024

Macau is slated to set a “new normal” this year, where GGR is forecast to grow by 30% year-on-year, according to a research report released by CLSA.

The projected figure will be a growth to USD29.2 billion, reaching 82% of the 2019 level.

The report also noted that Macau’s gaming industry recorded a better recovery in 2023, with changes in the operating environment for gaming enterprises, .

Wynn Resorts to lead gaming stocks

Las Vegas’ Wynn Resorts could be a star among gaming stocks this year as Macau’s rebound continues taking shape.

The analyst, as cited in a report by Casino.org, highlighted long-term potential with Wynn shares due to factors including lingering pent-up demand by Chinese nationals to travel to Macau and Wynn’s ability to shift its focus to premium mass clients, which is pertinent because a material recovery among VIPs could be further out.

“While we remain ahead of consensus, we believe the current consensus forecast remains overly conservative and embeds some macro softness entering the market,” added Wieczynski.

As cited in the report, Wynn’s ability to shift away from the embattled VIP segment to a stronger emphasis on Macau premium mass clients could pay dividends on another front.

Wynn shares are now trading at a 25%+ discount to their normal historical valuations, which the analyst suggested meant the “discount is pricing in a significant amount of recovery time or macro pressures, which we believe are overdone.”