A key factor in assessing the likely direction of the Macau casino sector is whether the trade dispute between the United States and China can be “quickly and agreeably resolved,” says an analysis issued on Thursday by brokerage Sanford C. Bernstein and Co LLC.
A topic addressed by the paper was what impact the tit-for-tat tariff on imports war might have on China’s economic growth, and Chinese consumer confidence.
Francis Lui Yiu Tung, deputy chairman of Macau casino operator Galaxy Entertainment Group Ltd, told GGRAsia on Wednesday that Chinese consumer concerns about the U.S.-China trade war “might have some impact” on casino gross gaming revenue growth rates in Macau during the current autumn season.
Sanford Bernstein hinted – in its Thursday memorandum on the macroeconomic issue – at a mercurial aspect to U.S. policy under President Donald Trump. A positive outcome might mean “the trade dispute with China – having turned as hot as the U.S. administration’s dispute with North Korea was at the start of the year or the dispute with Canada was over the summer – is quickly and agreeably resolved”.
The paper said that while the brokerage believed Macau gaming would continue to benefit from China’s gross domestic product growing annually by mid-single digits of percent, by expansion of domestic consumer spending power and growth in the number of middle-income Chinese able to afford to visit Macau, the possibility of “a deterioration of China’s economic backdrop” was “one of the critical risk factors to our Macau view”.
The paper, including analysis from the brokerage’s Hong Kong-based analyst Vitaly Umansky, mentioned some company-specific downside risks to three stocks covered by the institution.
Sands China Ltd, a unit of U.S.-based Las Vegas Sands Corp, could see “greater disruption at Cotai Central than expected due to renovations.” That was a reference to revamp work likely to start late this year to turn the Sands Cotai Central resort into a facility themed as The Londoner.
MGM China Holdings Ltd might face some negative risk from “Pansy Ho [Chiu King]‘s potential disengagement from MGM China in the future (and/or potential sale of large block of stock),” said the brokerage. It was referring first to a daughter of former Macau monopolist Stanley Ho Hung Sun, who was instrumental in getting U.S.-based MGM Resorts International a Macau gaming licence. MGM Resorts currently controls a majority of MGM China’s stock.
Wynn Macau Ltd, a unit of U.S.-based Wynn Resorts Ltd, might face challenges in the event of “VIP play worse than our forecast [which] could disproportionately impact the company.” The Wynn brand is associated by a number of investment analysts with strength in VIP gambling and in so-called premium mass, involving high-stakes play for cash rather than via the credit issued to traditional VIPs.
JP Morgan Securities Asia Pacific Ltd analysts DS Kim and Sean Zhuang suggested in an October 1 memo – citing channel checks – that VIP GGR had declined by around 5 percent year-on-year in September, whereas mass-market play probably rose by circa 10 percent.
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China