Casino companies operating in Macau moved lower on Monday after gaming revenue in the region fell a staggering 87.8% amid the spread of the coronavirus. Publicly traded companies in the Macau gaming space include Las Vegas Sands (LVS), MGM Resorts (MGM), Wynn Resorts (WYNN) and Melco Resorts (MLCO).
GAMING DATA: Macau's Gaming Inspection and Coordination Bureau said gross revenue from games of fortune in the region decreased 87.8% from a year earlier to 3.104B patacas last month. This compares to an 11.3% drop in January to 22.126B patacas and a 13.7% decline in December to 22.838B patacas.
February's weak performance continues a trend of declines that had been briefly halted in September. The slump follows a decision by Macau's government to suspend casino operations from February 5 for just over two weeks.
CORONAVIRUS IMPACT: The coronavirus is another setback for the gaming hub after a disappointing 2019 was weighed down by the trade war, Hong Kong protests, a crackdown on online gaming and a slowing Chinese economy. Macau's government also decided to suspend casino operations from February 5 for just over two weeks, dealing another blow to the gambling hub. Even after the partial resumption of business around February 20, China continued to halt individual and group visas to Macau and restrict transportation in a prolonged fight against the spread of COVID-19.
On February 11, the U.S. State Department raised it travel advisory for Macau to "Level 2: Exercise Increased Caution" due to the novel coronavirus first identified in Wuhan, China. The notice stated in part: "The Macau government has reported cases of the novel coronavirus in its special administrative region. In an effort to contain the novel coronavirus, the Macau government has placed restrictions on entry to its special administration region on individuals who have been to Hubei Province, China within the previous 14 days and may quarantine those they believe could have been exposed to the coronavirus."
ANALYST COMMENTARY: Bernstein analyst Vitaly Umansky told investors in a research note that GGR collapsed during Chinese New Year on the back of the COVID-19 crisis, with the Macau government ordering casinos shut down for 15 days and IVS and group visas into Macau are suspended and most transport is severely disrupted with most airlines cancelling or limiting flights into Macau and surrounding airports. China manufacturing PMI for Feb was reported at 37.5, well below optimistic estimates of 45, Umansky added.
"Looking at the glass half-full, we feel it could have been worse given the extensive level of disruption suffered," according to a March 1 note by JPMorgan analyst DS Kim. While they expect the near-term outlook to be "murky," stocks could move higher on "less bad" trends, the analyst said said. "We do not think COVID-19 will curb gamblers’ enthusiasm in a sustainable way, so its impact on the industry’s sustainable earnings power should be limited." Kim is forecasting a 24% decrease in gross gaming revenue for the year, based on the expectation of a 70% drop in March and 35% decline in the second quarter.
PRICE ACTION: In morning trading, Las Vegas Sands fell 2%, while MGM dropped 3.5%, Wynn Resorts declined 1.6% and Melco Resorts shares trading in New York were down about 2%.
Las Vegas Sands
-1.34 (-2.30%)
MGM Resorts
-1.1 (-4.48%)
Wynn Resorts
-2.02 (-1.88%)
Melco Resorts
-0.41 (-2.36%)