Jefferies: Short-term prospects in Macau remain bleak
The recovery of the gaming sector is likely to be further delayed even after the May 1 Labor Day, due to increased border controls and new cases being recorded on the mainland.
This is distressing the sector, as the upcoming holiday is a potential catalyst for the gaming industry, as well as for SMEs.
According to Jefferies analyst David Katz, this bad timing means a longer stretch before the long-awaited holiday tourism resurgence.
Casino stocks are also on the rise this week, with Tuesday gaming stocks gaining up to 5%, led by Wynn Resorts, followed by Las Vegas Sands (+4.2%), Melco Resorts & Entertainment (+4.0%) and MGM Resorts International (+3.2%).
However, according to Katz, short-term prospects in Macau remain bleak due to the Shanghai lockdown, as cited in a report issued by Seeking Alpha.
On Monday, Shanghai authorities reported the first Covid-19 deaths from the latest outbreak in China’s wealthiest and most heavily populated city.
All three people who died were elderly and had underlying diseases such as diabetes or hypertension and had not been vaccinated against the coronavirus.
The city has reportedly also set a new target of zero cases at the community level yesterday, meaning no new cases outside of quarantined zones – a tough measure since most of Shanghai’s cases are asymptomatic. In addition, Zhengzhou authorities have placed some areas in the Zhengzhou Airport Economy Zone under quarantine.
Brokerage firm Sanford C. Bernstein Ltd echoed that May would continue to record weak revenues, similar to its forecast with April, mentioning that Macau’s arrival-quarantine requirement has been extended to travelers from over 40 cities in 23 provinces.
This amounts to two-thirds of the provinces in China.
According to the SAR data, the volume of gross gaming revenues (GGR) of the mass market dropped by 9% quarter-to-quarter to MOP13 billion.
The Gaming Inspection and Coordination Bureau indicated that VIP gaming dropped slightly by 1.2% to MOP4.8 billion.
With these figures, the overall GGR is down 7% to MOP17.9 billion from January to March, with the latter month recording a new low, plunging 55.8% to its lowest level in 18 months, as a worsening Covid-19 outbreak in China has battered tourism in the SAR.
Despite the May forecast, the Macao Government Tourism Office is striving to boost arrivals through a series of events such as the upcoming drone gala, as well as the resumption of Macao Weeks in the mainland in the second half of the year.
