Macau’s gross gaming revenue is tipped to reach only 30% of 2019 levels this year, progressing to 63% in 2023, as rising COVID-19 cases in mainland China suggest there will be “no major travel easing between mainland China, Hong Kong and Macau in 2022,” according to investment bank Morgan Stanley.
In a note comparing Macau’s recovery trajectory to that of its regional neighbors, Morgan Stanley’s Praveen Choudhary, Gareth Leung and Thomas Allen warned that Macau industry-wide EBITDA might only reach 76% of 2019 levels by 2023 and that they “hope travel reopening becomes more visible from 2023, after the PRC National Congress in October 2022.”
In contrast, “ASEAN countries are opening travel among themselves and have a policy of living with COVID,” ultimately providing more upside to ASEAN gaming stocks.
Pointing to the stocks of Bloombery, operator of Solaire Resort in Manila, and NagaCorp, which owns Phnom Penh’s NagaWorld, as most compelling, Morgan Stanley said, “Most major Asian countries are easing travel restrictions from 2Q22, benefiting ASEAN gaming companies in both overseas and domestic demand recovery.
“All the ASEAN players were able to achieve positive FCFE (free cash flow to equity) in 4Q21 even before travel reopening, with the help of domestic demand, mostly. FCFE should continue to improve through 2022, repairing their balance sheets.”
Morgan Stanley has moved ASEAN Gaming from “In-Line” to “Attractive” while Macau Gaming has been adjusted down from “Attractive” to “In-Line”.
Of Macau stocks, the analysts prefer Sands China over Galaxy, with SJM Holdings least attractive due to “liquidity constraints, concerns about satellite casinos, and higher opex of the newly opened Grand Lisboa Palace.”
