Casino companies operating in Macau were in focus on Monday after it was reported that gaming revenue in the region jumped nearly 136% year-over-year last month. 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 increased 135.6% to 7.31B patacas in February compared to the same month of last year. This compares to a 63.7% year-over-year decrease in January to 8.02B patacas and a 68.5% decline in December to 7.82B patacas. GGR declined just 8.9% sequentially.
WHAT'S NOTABLE: February's results included the Chinese New Year, which was weaker-than-expected amid stay-in-place orders in parts of mainland China. Visitation to Macau declined 65.3% during the Chinese New Year. In the year-ago period, all Macau casinos had at least a 15-day pause as a COVID-19 countermeasure.
The February GGR figure also comes after China reinstated the Individual Visit Scheme, or IVS, for residents of Zhuhai from August 12, all of Guangdong Province from 26 August and all of mainland China from September 23. October's Golden Week in China was eagerly anticipated by the industry as a possible boost to Macau’s post-COVID GGR recovery, but was generally considered disappointing by experts, with visitation down 85.7% year-over-year.
Travel to Macau remains difficult amid a new variant strain of COVID-19 that recently emerged in the UK and has now been detected in Japan. The new strain has also showed up in parts of mainland China and authorities were warning against unnecessary travel in the lead-up to the Chinese New Year. On February 23, Macau authorities announced that no city in mainland China was any longer considered by the Macau authorities to be "medium risk" for transmission of COVID-19 infection.
ANALYST COMMENTARY: JP Morgan analyst DS Kim said that Macau’s February GGR “was [a] bit underwhelming, but doesn’t really move needle" and views the print as having little implication on forward estimates "given well-followed mid-month GGR and severe volatility around Chinese New Year holidays.”
Bernstein analyst Vitaly Umansky commented that China had been instituting larger scale lockdowns and urging reduction in travel in January and early February, but this began to ease in latter part of the month. The analyst added that "We expect to see gradually improving travel and GGR figures during the spring. Looking forward we expect to see Hong Kong reopen for Macau travel in the second quarter and for some China visa loosening in the summer.”
PRICE ACTION: In morning trading, shares of Las Vegas Sands were up 0.6%, MGM Resorts shares were up 0.5%, Wynn Resorts shares gained 1.1%, and Melco Resorts shares trading in New York fell fractionally.