Pent-up demand, border re-opening seen as positives for Macau casino stocks

Finance | 22 Jul 2021 7:14 pm

Macau casino stocks would be a good bet for medium to long-term investing, as the market is anticipating easing of border restrictions between Hong Kong, Macau and the mainland, an analyst said.

The optimistic outlook is also based on the currently low valuations, the expectation on pent-up demand after border reopening, and an expected 20 percent growth in the number of hotel rooms from 2019 to 2022, UBS Global Research said.

Angus Chan Chi-lap, head of Hong Kong strategy, said the loss of VIP customers will have a mild impact on the profitability of casinos, since pre-coronavirus data shows that mass-market customers contributed 80 to 90 percent of EBITDA.

As for the expiry of Macau’s gambling licenses in June 2022, Chan believes the Macau government would extend the current concession for at least two years.

In addition, UBS expects the MSCI Hong Kong index to end at 12,300 this year, implying a 6 percent downside.

The predicted drop is attributed to tightening liquidity conditions as global central banks start to taper their balance sheets, as well as the uncertainty of fully lifting cross-border restrictions.


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