Macau casino bulls see stock rally extending as revenue grows

[HONG KONG] Macau casino stocks are poised to continue their recent outperformance as special events and luxury hotel offerings help drive a recovery in gross gaming revenue, sell-side analysts say.

A Bloomberg Intelligence gauge of Macau gaming shares has risen 53 per cent from a low in April, compared with a 30 per cent gain in the Hang Seng Composite Index. That’s come as monthly gaming revenue for the world’s biggest gambling hub beat analyst expectations for each of the past three months.

Despite lingering worries over China’s economic health and regulatory issues, concerts by Cantopop icon Jacky Cheung and Korean rapper G-Dragon helped draw visitors. Eased travel policy and railway improvements are among the factors seen keeping the uptrend going.

“We expect the supportive visa regime, enhanced travel infrastructure and the expansion of nongaming offerings to drive robust gaming revenue growth in 2025,” Morningstar analyst Jennifer Song said in a presentation last month. “Shares are appealing now given the sector’s favourable long-term outlook.”

US-listed shares of Melco Resorts & Entertainment is leading gains, up 95 per cent from its spring trough, followed by a 70 per cent rise in Hong Kong-listed MGM China Holdings.

Yet sector valuations remain low, which Song sees supporting further upside for Macau casinos. The Bloomberg Intelligence index is trading at 8.7 times enterprise value to estimated forward earnings before interest, taxes, depreciation and amortisation, below its five-year average of about 14 times.

Monthly revenue figures will provide further clues for investors.

“July is expected to be another above-trend month,” Jefferies Financial Group analyst Anne Ling wrote in a note earlier this month. “The update from our sources and checks appears to substantiate the strong momentum in the stocks, which could continue.” BLOOMBERG