Macau casino operators face revenue slump as analysts pin hopes on ‘pent-up’ rebound in second-half
- Macau casinos face 50 to 80 per cent potential slide in revenue in the next two or three months amid closure order
- Pent-up demand could attract gamblers to world’s biggest hub in the second half, analysts say
Macau casino operators are likely to write off their performance in the first quarter as the number of visitors shrink and companies comply with an order to shut their premises to gamblers for two weeks to help contain the coronavirus outbreak, analysts said.
Gross gaming revenue in Macau could drop by 80 per cent for the three month to April 30, as the outbreak takes its toll on the economy, according to Morningstar Inc’s equity analyst Chelsey Tam. Revenue could recover by 15 per cent in subsequent months through year-end on the back of pent-up demand, she said.
Overall, Morningstar expects the industry revenue to decline by 20 per cent in 2020, before “getting back to normal in 2021.”
“People will want to get out of their homes after nesting for months,” said Tam, who is based in Hong Kong. “We think this is a good opportunity for long-term investors to go bargain hunting in the Macau gaming coverage.”
Tam, who has a buy recommendation on MGM China, Wynn Macau, Melco Resorts, SJM Holdings and Sands China, said the stocks are undervalued.
The Macau government issued the shutdown notice after a hotel employee was infected by the coronavirus, who is now among 10 cases recorded in the city. The deadly virus has since spread from the epicentre in Wuhan, the capital of central Hubei province, to more than a dozen countries.
