Morningstar Says Macau Recovery Is Underway With Full Completion In 2022

High-stake gaming promotions in Macau in 2021 have been reported to be lagging behind Las Vegas-focused and regional organizations. Investors are worried about the slow recovery of the world’s largest casino center and the recent rise in coronavirus cases in China.

Two notable adverse impacts from these scenarios can be noted, namely Las Vegas Sands (NYSE: LVS) and Melco Resorts & Entertainment (NASDAQ: MLCO). Since the beginning of the year, their shares are down 3.15% and 6.52%, respectively. Fortunately, some analysts think that headwinds will be fleeting in the near future and that Macau’s recovery efforts will spin up.

According to the Morningstar analyst Jeniffer Song, in spite of the short-term problems, management says that the rise in Golden Week attendance in May and the gradual improvement in monthly gross gaming revenue, or GGR, are quite encouraging. Besides, more and more people are showing great interest in vaccination after the pandemic has broken out in several countries in the past few months, shifting gamblers’ attention towards online venues. It’s a quite good alternative to land-based casinos indeed as, for instance, and other similar platforms provide numerous games, lucrative promotion offers, convenient payments, and many other great peculiarities. Due to this, the bulk of gamblers prefer online-based casinos more than brick-and-mortar ones.

Interestingly, Mainland China is essential to Macau’s economic recovery, as the country accounts for 70 percent of tourist flows to the gambling center. Plans to create a travel bubble with Hong Kong are another vital artery for visiting Macau. But they have been stumped by the rise in the number of COVID-19 cases in this country.

Favorable Recovery Timeline in Macau

Macau Recovery

Nearly all analysts were positive that the SAR casino industry would recover faster than competing markets in Asia Pacific or Las Vegas.

In addition to problems with visit scheme visas and relatively slow progress in vaccinations, some research firms are forced to drop expectations until Macau’s heavily gambling economy returns to pre-pandemic levels. For instance, the agency Moody’s Investors Company recently announced that this will not happen until 2024.

The number of vaccinations per day has skyrocketed, so herd immunity is likely to be achieved by the end of this year. Morningstar expects full citizen recovery to begin in Macau in 2022. Song says that they will soon be adjusting their 2021 profit forecasts for six Macau gaming firms, they also want to keep their value estimates and long-dated projections.

The research organization covers all of the Macau’s six concessionaires and declares SJM Holdings to be its favourite one, citing “financial stability, and potential gains in market share”.

Macau Shares Are Comparatively Cheap

Investors who are going to bet on the recovery of Macau shares are not required to pay to place such a bet, as the group is attractive in terms of valuation.

Song also states that nowadays Macau’s gaming sector is trading at about 10-11 times the 2022 Enterprise Value / EBITDA, that is below their valuation and historical average of 12-13 times.

It should be borne in mind that the concessionaires of Macau, listed on the main US exchanges, are LVS, Melco, MGM Resorts International and Wynn Resorts.

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