Rapidly rising visitation from mainland China to Macau, combined with recent positive news regarding the progress of leading COVID-19 vaccine candidates, has financial research platform Smartkarma predicting Macau GGR will return to 60% of 2019 levels next year – a full 15% higher than official government estimates.
In a weekend report, Smartkarma insights provider Howard J Klein highlights the Macau SAR government’s new 2021 budget, announced on 7 November, which predicts GGR of MOP$130 billion (US$16.3 billion) next year.
The figure represents around 45% of Macau’s 2019 GGR, however Klein notes that, over time, “Macau officials have generally tended to be very conservative in their forecasting given the need to budget government expenses in a worse-case scenario to ensure meeting them.”
Smartkarma has much higher hopes, predicting instead that GGR will reach US$22.5 billion, “closer to 60% of 2019’s GGR, indicating a 15% rise above Macau official estimates.”
At the heart of such a prediction is last week’s news that a trial vaccine being developed by American pharmaceuticals company Pfizer had displayed a 90% efficacy rate.
According to Klein’s report, the significance of the vaccine breakthrough on both the share price of gaming stocks and recovery timelines has been somewhat lost amid the global hoopla surrounding the US election. The news, he said, “triggered a huge one day market bounce,” which many observers wrongly attributed to Biden’s election win.
“Clearly, the market spike was all related to the vaccine news,” Klein stated. “The US elections results played a distinctly minor role as has been the case since the pandemic began. US/China tensions are what they are and will continue to be so. It’s all about a clarification of pandemic duration.
“That is the single factor ruling market trading today in the entire consumer discretionary space. It goes double for casinos and gaming.”
The potentially faster than anticipated release of a vaccine has Klein also anticipating an earlier uptick in visitor arrivals to Macau – likely in early 2Q21 versus the government’s more conservative Q3 or Q4 estimate – and therefore the return to 60% of 2019 GGR levels.
He points to Sands China, Galaxy Entertainment Group and SJM Holdings as the stocks with most upside potential from the vaccine news at 24.1%, 22$ and 14% upside respectively.