China’s zero-COVID policy, especially in gambling haven like Macau has wreaked havoc when it comes to gaming revenues. According to a report from Gaming Inspection and Coordination Bureau, the gross gaming revenue (GGR) in December fell 56% year-on-year to $433 million. This was slightly below Bloomberg‘s estimate of a 57% decline.
For 2022, Macau’s casinos generated total gaming revenues of $5.25 billion, a decline of 51% year-over-year. The 2022 gross gaming revenues are the lowest on an annual basis since 2004. However, analysts expect gaming revenues to grow with a bang in 2023 with a median growth target of 195%.
This expectation has been boosted by China easing its zero COVID policy and the country lowering its quarantine restrictions for travelers.
Even JP Morgan analyst Joseph Greff is bullish about the recovery of Macau’s gaming revenues in 2023 and believes that “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).”
Overall, the general view of Wall Street analysts is that casino companies that cater to the mass market are likely to fare better than the VIP heavy gambling havens.
Analyst Greff’s favorite top picks in this sector include Las Vegas Sands (LVS), Wynn Resorts (WYNN) and Melco Resorts (MLCO).
In another win for the above casino stocks, besides MGM Resorts (MGM), Galaxy Entertainment Group and SJM Holdings Ltd, late last year, Macau renewed the gaming license for all the above six gaming operators. These licenses are for a period of 10 years and have become effective from January 1, this year.
The iShares MSCI Hong Kong ETF (EWH) has dropped 9.7% in the past year.
