Casinos face lowest trading levels since border reopening

Macau concessionaires are trading at rock-bottom valuations since earlier this week as operators were saddled with declines of at least 20% since the beginning of the year.

Although casino operators’ revenues and profits are rebounding following the reopening of borders on Jan. 8, stocks prices have taken a downturn.

On Monday, only MGM saw an increase, rising 1% between Jan. 1 and Dec. 4, while the rest of the operators looked downhill.

SJM Holdings has witnessed the steepest decline, down 48%, followed by Melco Resorts & Entertainment, with a 38% plunge. 

Galaxy Entertainment Group and Sands China, who ranks as the third-best performer of the six, have experienced falls of 21% and 22%, respectively. Wynn Macau has slipped 32%.

“We understand valuations alone may not drive the stocks in this market, but we can’t help but think these stocks are oversold,” JPMorgan analysts said in a recent note.

“At the current level of FCF yield […] just the cash flow paying down debt should generate [around] 15% annual returns on equity for names such as MGM, Wynn and Melco. We see great value in Macau names.”

Yesterday, MGM, Sands China, Melco and SJM were on the green as their shares rose 4.4%. 3.96%, 3.63% and 2.21% respectively.

Galaxy and Wynn were still slightly down by 0.73% and 0.027%, respectively.

Last month, Macau’s gaming revenue reached MOP16.04 billion, a figure that represents a significant 435% increase compared to the same period last year when the city was still under Covid restrictions.