Shares of casino operators gained big on Monday after Macau officials said the easing of travel restrictions to combat the epidemic would begin in the coming weeks.
News broke over the weekend that Macau was fine to resume issuing electronic visas to individuals and tour groups in late October or early November. JPMorgan analyst Joseph Greif said it would be the “first meaningful” easing of travel restrictions to gambling centers since the start of the Covid-19 pandemic.
“This positive development is not what the industry or investors expected, and we view this as policy news. [a] It’s a big positive for a sector that’s been seen as very difficult to invest in on the buy side,” Greif wrote in a note to clients for two key reasons:
A “sad” recent operating environment where overall gaming revenue processing rates are about 10% of pre-pandemic levels.
Inability to reasonably predict when travel activity between China, Hong Kong and Macau will begin to improve.
Wynn Resorts Limited WYNN Shares,
The S&P 500 index SPX added 12.7% to pace the gains.
and Las Vegas Sands Corporation’s stock LVS;
It rose 12.4% to rank second in the benchmark index.
Elsewhere, Melco Resorts and Entertainment Limited shares MLCO;
Shares of MGM Resorts International rocketed 28.2% to a five-month high.
He got 0.8%.
Although the e-Visa news is positive for all Macau-centric stocks, Greif said he likes Las Vegas Sands, or LVS, not only because of Macau’s recovery, but also because of expectations for the marina. Bay Sands property in Singapore.
“As both their markets have experienced a recovery, we expect additional capital returns (something that sets LVS apart from the rest),” Greif wrote.
For the second quarter, LVS reported total Macau revenue of $374 million, or 35.8% of total revenue, while revenue from Marina Bay Sands reached $679 million. For Wynn, total income from Macau operations was $117.2 million, or 12.9% of total income, while MGM China’s income was $143 million, 4.4% of total income.
“Of course they may be in fits and starts with the Covid pandemic, but this news should be positive for a sector that has underperformed for so many years that sentiment can be interpreted as negative,” Greif wrote.