Despite Macau’s gaming industry witnessing a robust recovery in revenues and profits since reopening its borders in January, the stock prices of key concessionaires have taken an unexpected nosedive. This decline, observed in five out of six concessionaires’ stock prices, has left industry analysts puzzled, especially as Macau’s gaming sector approaches pre-COVID levels.
Contradictory Trends:
In a surprising twist to Macau’s recovery narrative, stock prices for major concessionaires have shown a consistent decline, with five out of six companies experiencing a more than 20% drop compared to their values on January 1, 2023 – a week before the border reopening. Only MGM China has seen a modest improvement, showcasing a 1% increase over its January 1 trading price, attributed to the addition of new gaming tables under its recent 10-year gaming concession.
Analysis by 2NT8 Ltd:
A comprehensive analysis conducted by industry consultancy firm 2NT8 Ltd reveals that the Hong Kong-listed stocks of these concessionaires have been on a steady decline since August, hitting their lowest point in December. Managing Director Alidad Tash notes that this trend starkly contrasts with the actual performance of the casinos, where revenues and profits have been consistently rising.
Market Performance:
As of December 4, 2023, key players in Macau’s gaming industry face substantial drops in their stock values. Galaxy Entertainment Group is down by 21%, Sands China by 22%, Wynn Macau by 32%, Melco International Development by 38%, and SJM Holdings by a staggering 48%.
Potential Explanations:
While no single reason can explain this downward trend, Tash suggests that the prevailing fear of a slowdown in China, particularly in non-essential spending sectors like luxury items, gaming, and leisure, might be a significant factor contributing to the decline in stock prices.
Similar Observations by JP Morgan Analysts:
JP Morgan analysts echo the surprise expressed by industry experts, noting in a recent research note that the combined market capitalization of Macau’s six concessionaires has regressed to levels observed a year ago and is only half of pre-COVID levels.
The unexpected decline in Macau’s gaming stocks, despite positive operational performance, raises intriguing questions about market dynamics and investor sentiment. As the industry navigates the post-COVID landscape, factors such as broader economic concerns in China and evolving consumer behaviors may be influencing stock prices. Analysts and stakeholders keenly await further developments, hoping for a clearer understanding of these market trends and their implications for the future of Macau’s gaming industry.