Casino stocks soar ahead of group visa reinstatement
Gaming shares soared yesterday, the highest surge recorded in six months following a long-
awaited announcement that will bring an end to the tourism drought that has negatively impacted the economy.
Over the weekend, the Chief Executive announced that the return of group tours from mainland China can be expected as soon as late October, along with the reinstatement of digital travel endorsement applications.
Tours will restart gradually from the provinces of Guangdong, Zhejiang, Jiangsu, Fujian and the municipality of Shanghai, with Guangdong being the frontier.
After the closing trade yesterday, Sands China led the surge in gaming shares with 15.65% growth, followed by SJM Holdings (+11.57%) and Wynn Macau (+11.06%).
Galaxy Entertainment Group’s shares also increased by 7.18%, while Melco International Development and MGM China increased 5.26% and 4.64% respectively.
“Finally, we feel we can talk about a return to normalcy,” JPMorgan Chase & Co. analyst DS Kim wrote in a note Sunday. “The resumption of e-visa and group tours should alleviate friction for a Macau trip, as well as signal to many that it’s OK to visit Macau, in turn boosting demand into the year-end holidays and 2023.”
However, Angela Hanlee, Bloomberg Intelligence Analyst on APAC Gaming and Hospitality Research, warned that forecasts for the city’s gross gaming revenue (GGR) for the year 2022 will not be altered.
“The issue is that group tours have never been a major driver for Macau casinos because their spending [power] is not high,” said Hanlee on Bloomberg Radio,
“This is revitalizing those current empty casino floors in Macau, but I would not expect much change this year. Our forecast GGR may only reach 20% of pre-covid levels,” she added.
The issuance of group package tours to Macau and eVisas under the Individual Visit Scheme (IVS) is shaping up to be a massive boost for the SAR’s gaming and tourism operators, which have been negatively affected since the pandemic began in early 2020.
According to André Cheong, Secretary for Administration and Justice, the reinstatement will boost gaming operators’ confidence to continue investing in the SAR, admitting that it was natural for the bidders to have concerns about the possible return of investment to the city.
However, the city will continue to face headwinds amid the current turmoil in the gaming sector as mainland China and Macau continue to adhere to their zero-Covid policies. This means that a small number of cases may lead to lockdowns and travel restrictions.
As Beijing is also tightening control over the travel of frequent gamblers, the e-visa change is unlikely to help, said Credit Suisse analysts including Kenneth Fong in a note.
Brokerage firm Sanford Bernstein earlier noted that “channel checks have indicated that frequent gamblers to Macau have seen [their] visa issuance denied by China immigration offices.”
