Macau casino revenue surges in January after COVID restrictions eased

Gross gaming revenue in Macau soared 82.5% year-over-year in January to 11.6B patacas ($1.4B) to smash the consensus estimate for a 37% increase. The GGR tally was the highest since January of 2020, according to data from the Gaming Inspection and Coordination Bureau. The strong month was tied to the government ending most COVID-19 border restrictions on January 8, just in front of the Chinese New Year holiday. 

Casino operators reported strong traffic for the Lunar New Year holiday period, while hotel operators report strong booking trends through February and March as well. The surge in revenue is expected to boost Q1 results for Macau casino operators and create positive cash flow for some.

A general view is that casino operators with a higher exposure to the mass market will see stronger growth rates in 2023 than the VIP-heavy operators. "We think there is more room for recovery, particularly within Mass GGR in 2023 (when we think GGR can approximate 60% of 2019 levels) and improving further in 2024 (to 90% of 2019 levels)," noted J.P. Morgan analyst Joseph Greff. Overall, the firm sees Macau stocks as excellent plays on China reopening and singled out Las Vegas Sands (NYSE:LVS), Wynn Resorts (WYNN) and Melco Resorts (MLCO) as top picks. On a valuation basis, Macau gaming stocks trade at 11X 2024 EV/EBITDA estimates to mark a discount to the historical average of 13X.

Macau casino stocks: Wynn Macau (OTCPK:WYNMF) (OTCPK:WYNMY), Wynn Resorts (WYNN), Sands China (OTCPK:SCHYY) (OTCPK:SCHYF), Las Vegas Sands (LVS), MGM China (OTCPK:MCHVF) (OTCPK:MCHVY). MGM Resorts (MGM), Galaxy Entertainment (OTCPK:GXYEF), SJM Holdings (OTCPK:SJMHF) (OTCPK:SJMHY), Melco Resorts & Entertainment (MLCO), Studio City International (MSC).

Studio City International (MSC) has the highest Seeking Alpha Quant Rating score in the casino sector at 4.98.

Las Vegas Sands (LVS) has the highest consensus rating from Seeking Alpha authors.