Macau gaming stocks plunge on concerns

The Macau casino sector was reeling again on Monday after China showed that the long-standing zero tolerance Covid policy is still very much in effect, CFRA Research shows.

Earlier on Monday, officials in the economic center of Guangzhou announced that all schools and restaurants will be closed in order to control the sudden rise in positive cases.

That decision came just a few days after President Xi Jinping’s re-election at the communist party meeting. There had been some hope that Beijing would ease up restrictions following the meeting.

Shares of Melco Resorts fell 9.39 per cent in pre-market action on Monday and Wynn Resorts was down 6.36 per cent amid broad selling pressure in China tied to concerns about economic growth.

Las Vegas Sands shed 8.65 per cent in the early session despite CFRA Research hiking its rating on the casino stock to Buy from Hold.

CFRA Research analyst Zachary Warring highlighted that Marina Bay Sands Singapore continues to be the bright spot for the casino operator with $343m in adjusted EBITDA last quarter.

“Although LVS’ balance sheet has weakened over the past two years due to Covid-19 lockdowns, the company has plenty of cash after the sale of The Venetian and we now expect continued improvement in Macau over the next 12 months bringing EBITDA up to about 60 per cent of pre-pandemic levels,” the analyst argues.

In turn, “LVS has done well to cut expenses in a tough operating environment in Macau and we believe the risk is now skewed to the upside for shares,” the brokerage maintains.

Source: Asia Gaming Brief