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Casino Analyst: Latest Chinese Economic Data Bullish For Macau

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Casino Analyst: Latest Chinese Economic Data Bullish For Macau

Casino stocks have taken a big hit in 2020, but the latest economic data out of China suggests the world’s largest gambling hub could be well on the path to recovery.

The Numbers: On Thursday, BofA Securities released its August Macau Macro Activity Tracker — MMAT — reading.

The MMAT is an average reading of the year-over-year growth of 12 data series across China that have the highest correlation to Macau gross gaming revenue, or GGR.

Since 2009, the MMAT has shown a 91% coincident correlation with monthly Macau GGR growth.

In the month of August, MMAT was up 5.3% year-over-year, the highest monthly reading of 2020.

Analyst Shaun Kelley said the data is encouraging for Macau investors, but they should still keep near-term expectations in check.

“Visa issuances, other travel restrictions and junket liquidity could create a bottleneck that will likely hinder the pace of recovery in Macau,” the analyst said in a note. 

Visa issuance returned Sept. 23, but Kelley said processing logistics will likely limit travel to Macau for October’s Golden Week holiday.

Macau GGR was down 94.5% in August and was down 88% during the first 20 days of September.

How To Play It: Bank of America has the following ratings and price targets for U.S.-listed Macau casino stocks:

  • Melco Resorts & Entertainment Ltd (NASDAQ: MLCO), Buy rating, $23.20 target.
  • Wynn Resorts, Limited (NASDAQ: WYNN), Buy rating, $95 target.
  • Las Vegas Sands Corp. (NYSE: LVS), Buy rating, $61 target.
  • MGM Resorts International (NYSE: MGM), Underperform rating, $15 target.

Benzinga’s Take: Lifting the travel restrictions to and from Macau is the first step in the recovery process, but it will still take time for gamblers to feel comfortable traveling and gaming in a crowded casino. An 88% decline in September GGR through the first three weeks of the month is far from ideal, but at least numbers seem to finally be trending in the right direction in Macau.

Related Links:

Short Sellers Have Lost Nearly $1.3B On DraftKings, Penn National

Macau Gaming Revenue Down 94.5% In August, Analyst Sees Rebound In September

Latest Ratings for MGM

DateFirmActionFromTo
Oct 2020BarclaysDowngradesEqual-WeightUnderweight
Sep 2020Roth CapitalDowngradesBuyNeutral
Sep 2020Goldman SachsDowngradesNeutralSell

View More Analyst Ratings for MGM
View the Latest Analyst Ratings

 

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