General growth of visitor numbers to Macau, and a possible uptick of casino business during China’s October Golden Week holiday period, might not be “as exciting” as some commentators are hoping, says a Wednesday note from analyst David Bain, of Roth Capital Partners LLC. China’s State Council has designated October 1 to October 8, inclusive, as the holiday period.
Macau visitor volume had “recently improved to 15,000 per day from 10,000 per day approximately one month ago,” conceded Mr Bain, adding that inferred a monthly-visitor volume “run-rate of 450,000 versus an average of approximately 3 million” per month, last year.
Banking group Morgan Stanley noted earlier this week that its recent proprietary research suggested five high-end casino resort hotels in Macau would be full for Golden Week. Such occupancy is commonly viewed as a possible positive for the outlook on gaming floor performance.
Roth’s Mr Bain sounded a note of general caution on this autumn’s upcoming Golden Week.
“Many investors cite Golden Week as a catalyst to significant, sustainable visitation increases and a showcase for profitability for many casinos,” he stated. “However… we are concerned recovery estimates may again be pushed back, with investor patience potentially waning in wake of heightened Macau risks for U.S. operators,” said Mr Bain.
Three of Macau’s current six Macau gaming licensees have United States-based parent companies, and geopolitical tensions between the U.S. and China are currently high on a number of issues, including cross-border trade and digital technology. In addition, the six Macau operators will see the expiry in June 2022, of their current gaming rights, and a public retender process associated with that event.
In Wednesday’s note – on Las Vegas Sands Corp, parent of Macau operator Sands China Ltd – the Roth analyst stated: “While all [Macau] junket operators cite underserved VIP demand,” two junket groups “cited a belief [Chinese VIP] customers would be more focused on getting businesses back in order long before a broad VIP recovery could take place.”
In a separate note that day on Wynn Resorts Ltd, parent of Macau operator Wynn Macau Ltd, Mr Bain stated: “Volatile U.S./China relations, could also dampen the typical Macau, ‘they all win,’ mantra; and we believe certain operators are structurally better-positioned” to benefit long-term during the recovery, than the Wynn brand.
Wynn Resorts’ calendar-year 2019 VIP gaming revenue “was approximately 50 percent of its total gaming revenue, the highest weighted amongst peers,” said Roth.
In a separate memo, on another operator with Macau interests, Melco Resorts and Entertainment Ltd, Mr Bain observed that the group’s VIP and total mass-market share of gross gaming revenue “increased significantly” in the second quarter, relative to indicators from 2019. That might give Melco Resorts “recovery positioning better than the others” in Macau, he said.
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