Macau’s gaming recovery gains momentum in August

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The very latest channel check from Jefferies on Macau traffic was modestly positive again as Macau gaming revenue improved in the past week, with month-to-date traffic at its highest level this year. Macau daily revenue for the week ending on August 13 improved 7% from the level seen for the week August 1-6. Analyst Andrew Lee pointed to accelerating summer holiday traffic and noted that Macau was the top destination for Chinese overseas tourists during the first half of the year, based on a China Tourism Academy report.

The firm expects the Macau recovery to continue right into the key Golden Week holiday in October. Looking at the Macau sector as a whole, Lee and team think the larger issue is how much of the ongoing recovery is priced into share prices already. Jefferies maintains a bullish sector view based on Macau being the clear overseas destination of choice for Mainland Chinese over Hong Kong and Taiwan. The top global sector pick for U.S.-listed names is MGM Resorts (MGM) for its domestic, digital, and Macau growth avenues. On a valuation basis, MGM Resorts (MGM) was called attractive with it trading close to trough EV/EBITDA multiples. Galaxy Entertainment (OTCPK:GXYEF) and Sands China (OTCPK:SCHYY) are the favorites of Jefferies for Hong Kong-listed stocks, with both companies expected tp benefit from specific catalysts. Galaxy was noted to be the only Macau operator trading above mid-cycle EV/EBITDA, but the view from Jefferies is that is explainable given the phase 3 opening with the flagship Raffles hotel.

GGR check: Macau gross gaming revenue rose 4,086% year-over-year in July to $16.6B patacas ($2.07B) against a soft comparable to last year when travel restrictions were in place for several weeks. The consensus-topping tally also represented a 9.6% increase from June and was the highest since the pandemic, although it still fell about 30% below the pre-pandemic level of gross gaming revenue in July of 2019. The comparison for August is a little tougher due to the lockdown reversal a year ago in some key regions. For the first seven months of 2023, Macau gross gaming revenue was up 263% year-over-year to $96.80B patacas. The return of live performances has boosted traffic in Macau over the last two months. The Macau hotel occupancy rate reached 89% in early July and is expected to stay around that level during the vacation season.

Macau casino stocks: Wynn Macau (OTCPK:WYNMF, OTCPK:WYNMY), Wynn Resorts (WYNN), Sands China (OTCPK:SCHYY, OTCPK:SCHYF), Las Vegas Sands (LVS), MGM China (OTCPK:MCHVF, OTCPK:MCHVY). MGM Resorts (MGM), Galaxy Entertainment (OTCPK:GXYEF), SJM Holdings (OTCPK:SJMHF, OTCPK:SJMHY), Melco Resorts & Entertainment (NASDAQ:MLCO), Studio City International (MSC).