Macau Gains Investment: Hopefully Performance Delivers by November
Published October 8, 2022 by Lee R
November is the new proving ground to fulfill renewed investment expectations in Macau.
The recovery of one of iGaming’s and gaming’s leading meccas Macau has been slow, but recent news suggests a strong sign of resurgence bears further discussion.
Optimistic News
The stock rebound of China’s protectorate gaming capital was boosted by the key news last week that China is resuming the e-visa scheme to facilitate the travel of mainland travelers and tour groups to the island, which loosens lingering restrictions on movement since Covid crippled Macau’s industry.
Visa System Restored
The resumption of e-visa permits ostensibly paves the way for visitors to return to the region when it re-opens in November. This development in advance of re-opening is what sent stock prices spiking since the measures were originally expected for next year--and because mainland gamblers from China traveling to China’s only legal gambling region accounts for 90% of Macau’s total casino revenue.
Stock Jumps
The suggestion of normality brought the biggest boost in stocks to was seen in Macau in a big jump by operator Melco Crown Entertainment (+25.47%) with several more operators following the rise.
Applications Continue
Hope has remained for when the Macau region finally returns to prominence, as evinced by the seven applicants for the six new Macau licenses available.
Revenue Still Down
The latest earning totals are still lagging, which comes as no surprise considering the market and region has yet to be fully re-opened.
Latest Figures
Fresh figures from the Gaming Inspection and Co-ordination Bureau show Macau’s GGR for September to be at MOP2.96bn (US$370m), representing a massive year-on-year drop of 49.6 percent off from last September.
Post-Covid Spiral
Another indication of a continuing post-covid freefall includes accumulated gross revenue stood at MOP31.8bn (US$3.99bn), down 53.1 percent from 2021.
The Motivation
So what are investors banking on in the world’s largest gambling market of Macau at this point?
Shares of Macau casino operators rose a total of 13% on 26 September Monday as a result of the e-visa announcement, which was further backed by Macau chief executive Ho Iat Seng’s commitment to re-open the mainland to tour groups in November.
Analysis
Hong Kong JP Morgan analysis DS Kim Mr. Seng provided his take on the renewed interest from investors:
“Although it’s tough to quantify the immediate benefit, we believe the resumption of e-visas and group tours should alleviate friction for a Macau trip, as well as signal to many that it’s okay to visit. Finally we feel we can talk about a return to normalcy.”
More Share Raises
That return to normalcy is a strong hope that can fuel backing of any signs of life, and has led to shares of Sands China (1928.HK) jumping over 13%; Wynn Macau (1128.HK) rising 7%; Galaxy Entertainment (0027.HK) climbing 10%; and SJM (0880.HK) and MGM China (2282.HK) each saw jumping 8% increase in share price.
Streamlining to Pre-Covid
Logistically, the removal of the current requirement of Chinese visitors to schedule a visa appointment and then wait out a week-long approval procedure would understandably facilitate movement, with the statistics backing this up.
Individual Arrival Optimism
In 2019, 50% of Chinese visitors to Macau entered on individual visas, compared to 25% who came as part of tour groups. Thus eliminating the individual covid-inspired registration process gets half of the main Macau visitors moving. That certainly could give investors hope.
Tour Groups Optimism
As far as the tour groups, we see further signs of hope: the five China provinces of
Guangdong, Shanghai, Zhejiang, Jiangsu, and Fujian will resume hosting tour groups in November. That represents 60% of mainland trips to Macau in 2019, meaning over half of the tours from China will be restarted to Macau this November as well.
Outlook
With six-month licence extensions additionally in place from June 23, it appears a bridge has emerged which could deliver the performance Macau investors are newly bullish on.
