Macau casino stocks traded lower in the aftermath of Golden Week, the Chinese national holiday that takes place from October 1 to October 7.
That wasn’t the only challenging news for gaming operators in the Chinese special administrative district (SAR). The local government may also demand a greater financial investment from operators bidding for new 10-year gaming licenses, with terms to begin in January.
According to MSN News, following Golden Week, which celebrates the founding of the People’s Republic of China, MGM China saw a 5.34 percent drop, followed by Wynn Macau and Sands China with declines of 4.45 percent and 4.47 percent, respectively. Galaxy shares fell 3.34 percent, Melco 2.86 percent and SJM Holdings 2.88 percent.
On October 11, shares of U.S.-listed Macau stocks in New York were lower still, with Wynn posting the biggest drop at 11 percent. Las Vegas Sands was next at 7.2 percent, with Melco Resorts & Entertainment down 6.1 percent and MGM Resorts International down 3.7 percent.
Macau saw a boost in incoming travel during the holiday, welcoming more than 182,000 visitors. It was a shot in the arm for the gaming hub, which has suffered from low visitor numbers since a widespread Covid outbreak in mid-June that led to border restrictions.
And the gaming sector recorded a surge in gross gaming revenues, which doubled compared to the first nine days of September: MOP1.7 billion (just short of US$210 million) or approximately MOP190 million a day, according to JP Morgan Securities (Asia Pacific).
However, this figure was only 15 percent to 20 percent of pre-Covid levels for Golden Week, when daily GGR reached the MOP1 billion mark. Citigroup analysts called it a “slightly underwhelming” recovery.
While Golden Week visitation was the highest since 2019, player spend was down by 20 percent to 40 percent due to “wealth impact” from China’s weaker economy and property market.
As if that the environment wasn’t tough enough, in an October 11 note to investors, Credit Suisse analysts Kenneth Fong, Lok Kan Chan and Sardonna Fong said the concession retender process “is not as straightforward as expected, with the government demanding much more non-gaming investment.
“Most operators need to lift their proposed spending when they meet with government,” they wrote. “We see pressure to the already stretched balance sheet and long-term margin,” they wrote. “We expect GGR is likely to stay soft amid Covid regional outbreaks in China.
“Besides investment amount, the operators also need to provide a clear spending timetable,” the team continued. “An increase in investment commitment would inevitably put more stress into the already stretched balance sheet of certain operators, as well as lowering the long-term margin for the sector, in our view.”
The analysts project October’s full-month GGR to reach MOP$4 billion to MOP$5 billion (US$495 million to US$618 million).
Meanwhile, the SAR is anticipating the resumption of group package tours and eVisas for mainland travelers. But with Zhuhai facing new Covid cases, that could mean more district lockdowns. The SAR government has also imposed border restrictions for cross-border travelers.
According to GGRAsia, Beijing shows no sign of easing its “dynamic zero-Covid” policy, which may persist into next year, said gaming scholar Wang Changbin.
