Gaming sector poised for strong finish in 2024 with revenue recovery

The gaming industry is experiencing a notable resurgence, with casinos reporting significant revenue increases that have surpassed market expectations. According to an investor note from Jefferies Equity Research, casino revenues moderately outperformed forecasts, with strong numbers anticipated for December, aligning with government projections.

In November, the region’s gambling winnings soared 14.9% year-on-year, reaching MOP18.4 billion, slightly exceeding Wall Street’s highest expectations. Jefferies analyst David Katz noted that while a “new normal” is emerging—characterized by diminished high-roller play and an uptick in mass-market action—this growth reflects a positive trend for the industry post-pandemic.

The November figures not only delighted the government but also surprised Wall Street, as they exceeded consensus projections by 1.7% and Jefferies’ forecasts by 7.1%. Katz projected Macau could close out 2024 with aggregate gambling revenue as high as MOP28.5 billion, contingent on casinos earning MOP2.4 billion in December—just shy of Jefferies’ estimate.

Further bolstering optimism are recent changes in immigration policies set to take effect Jan. 1, allowing residents of neighboring Zhuhai and Hengqin increased access to Macau. Katz said this could enhance both gaming and non-gaming revenues as more tourists flock to the region, potentially attracting premium-mass players.

However, despite these promising developments, Katz cautioned about potential challenges ahead. He noted U.S.-facing stocks could face valuation headwinds due to political uncertainties surrounding the recent U.S. election and its implications for U.S.-China relations, particularly with tariff threats from the incoming Trump administration looming.

Among the gaming concessionaires benefiting from this recovery, Katz highlighted Galaxy Entertainment for its high-end infrastructure and Las Vegas Sands for its market position reinforced by upcoming room upgrades at The Londoner complex in Macau and at the Marina Bay Sands in Singapore.

Cumulative gross gaming revenue has reached MOP208.6 billion for the first eleven months of 2024, marking a 26.8% increase year-on-year but still reflecting a gap of 22.6% compared to pre-Covid figures.

Nonetheless, Katz stresses the importance of monitoring external economic factors and political developments that could impact this momentum. Nadia Shaw