International edition
October 19, 2021

Revenue for July totaled us$ 1.2 billion, up 3.1 % from a year earlier

Macau casinos may be better value than Las Vegas peers

(Macau).- Casino stocks in Macau have lagged the recent gains in their Las Vegas counterparts and now offer better value, especially in view of their growth prospects, according to an analyst report.


n a recent note titled "Green shoots seen in Macau but not Vegas," Citigroup Global Markets said it preferred "pure Macau" gambling stocks - those without operations outside Macau - over US players. Las Vegas casino stocks as a group have risen 375% from lows earlier this year, while Macau players have climbed about 90%, Citi said.

More important, it said, Macau's gaming outlook appears better than that for Las Vegas, with gambling activity in the former Portuguese enclave - now the world's biggest casino hub - expected to show year-on-year growth in July.

Casino revenue for July totaled us$ 1.2 billion, up 3.1 % from a year earlier, according to the South China Morning Post, which cited figures leaked by Portuguese news agency Lusa. "Las Vegas is a market with a significantly lower gaming growth trajectory versus Macau," wrote Citi analysts headed by Anil Daswani.

Las Vegas appears to have peaked in terms of revenue in 2007, Citi said, although it stopped short of forecasting a secular decline for the US gambling center.

The brokerage said the market would likely take a shine to the pure Macau casino operators in coming months. Shares of these casinos are trading at lower valuations than their Vegas peers, have stronger balance sheets and no exposure to the increasingly competitive market in Las Vegas.

Citi named Melco Crown Entertainment, Melco International, SJM Holdings and Galaxy Entertainment are among its favored Macau casino stocks. Citi says it's also upbeat on slot-machine operator NagaCorp. rating the company as a "conviction" buy. SJM Holdings' Chairman Stanley Ho underwent brain surgery in the past week to remove a blood clot and is in satisfactory condition recovering in a Hong Kong hospital, according to a company statement Tuesday.

Analysts said it would be hard to quantify the impact upon the fortunes of the Ho family if the 87-year-old patriarch were unable to resume his duties. SJM has the single biggest market share in terms of casino revenue in Macau, while the Ho family controls three of the enclave's six casino concessions.

Shares of SJM Holdings ended 0.3 % higher in Wednesday's trade, reversing part of Tuesday's 4.5% slide, despite concerns over Ho's health. Melco International stock, meanwhile, slipped 3.6 %. The moves compared with a 1.5% decline in the benchmark Hang Seng Index. Elsewhere, Tokyo's Nikkei 225 ended 1.2 % lower, Australian shares fell 1% and China's Shanghai Composite slipped 1.2 %.

A new pure Macau casino player may join the group if Wynn Resorts proceeds with plans to sell off its Macau assets in a Hong Kong initial public offering.

Media reports last month said Wynn could debut the Macau spin-off in Hong Kong sometime in the October-December quarter, potentially raising us$ 1 billion to us$ 2 billion. But Citi said it doesn't recommend investors buy shares in Wynn Resorts, adding that the Hong Kong IPO is unlikely to happen unless Wynn decides it can spin off the Macau assets at a premium.

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