The biggest news about the coronavirus and its impact on Macau gaming came in two forms: visitation statistics, and the outlook of the first casino operator to discuss the matter, Las Vegas Sands.
The declines and trend of declines in visitation, starting Friday, January 24 were startling:
Friday, January 24: -34.6 percent
Saturday, January 25: -59.0
Sunday, January 26: -74.1
Monday, January 27: -84.1
Tuesday, January 28: -87.3
Wednesday, January 29: -89.1
Ninety percent of business disappeared in one week. So much for comparison to the 2003 SARS epidemic, when visitation declined 35 percent.
But that doesn’t mean that gamblers have quit gambling. Jason Ader of SpringOwl Asset Management said that online gaming rose 90 percent during Chinese New Year—even though iGaming is illegal in China.
The conclusion: Macau gaming will bounce back when, as Las Vegas Sands COO Rob Goldstein said on the company’s fourth-quarter investor call, the storm passes.
And pass it will, Goldstein said, citing the list of epidemics in modern times, such as the Hong Kong flu and the Russian flu.
The same will be true in Macau. “You can count on pent-up demand,” Goldstein said.
The day after Goldstein’s comments, the stock jumped 2.32 percent to $66.20.
Apparently, investors agree.
Gaming REITS: See How They Run
Gaming and Leisure Properties and VICI Properties have been hitting new highs day after day. Recently, they had eight- and nine-day streaks of new highs.
Even though they dipped last Monday, when the overall stock market was rattled by news of the coronavirus spreading, they quickly resumed their upward march.
Generally, REITs are unexciting companies, as they hold real estate, collect rents, recycle properties and mostly make a life out of simple blocking and tackling.
But gaming REITs clearly have caught investors’ eyes. As analyst Jordan Bender of Macquarie pointed out, the stocks of the three gaming REITs advanced 36 percent last year, beating the S&P 500’s banner 31 percent leap and the All Equity REIT Index’s 29 percent rocket ride.
The reasons for the gains have been discussed in this space before:
- The ability of REITs to create deal and rent structures that give higher valuations to properties in mergers and acquisitions have helped accelerate the number of acquisitions. That, by definition, means their property portfolios, and by extension their rental revenues, grow. In a sense, gaming REITs are in a growth phase.
- The recent sale-and-leaseback deals that MGM Resorts has signed with Blackstone and its own REIT spin-off, MGM Growth Properties, has excited investors over Las Vegas Strip real estate values.
- In a low interest rate environment, their dividends give income-oriented investors high returns, both in relative and absolute bases, even as their stock prices have risen. Gaming and Leisure Properties’ dividend yields 6.1 percent, MGP’s 5.9 percent and VICI’s 4.5 percent.
- The combination of secure rents and high dividends make gaming REITs a safe haven, important always, but especially today, as many investors fear a recession may be looming. And now, there’s that growth kicker, though most of the big deals are by now in the past.
So, can the stocks continue their advance?
Bender thinks so, noting, among other things, that gaming REITs are still valued 30 percent below non-gaming peers.
Bender raised his target on GLPI to $50.
