Las Vegas Sands Leads Macau Stock Rally as Border Talk Gains Momentum

Posted on: November 22, 2021, 09:21h. 

Last updated on: November 22, 2021, 01:51h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Las Vegas Sands (NYSE:LVS) is leading a Monday resurgence in Macau gaming stocks, as some analysts are turning slightly bullish on the beaten-down group. That’s amid speculation the China/Hong Kong border could soon reopen.

Macau stocks
Macau stocks get a lift from border talk and analyst comments. Las Vegas Sands leads the way. (Image: New York Times)

Should that border reopen, it could pave the way for thousands of tourists to enter Hong Kong and potentially move travel onward to Macau, boosting the number of daily arrivals in the gaming center. While the number of people initially allowed to cross the border will be just a few hundred daily, that figure is expected to grow into the thousands. More importantly, residents will be able to enter the mainland from Hong Kong without being subjected to coronavirus quarantine protocols.

That policy is expected to go into effect in early December — two weeks sooner than expected — reports The South China Morning Post.

The news, coupled with some slightly encouraging commentary from Wall Street analysts, has shares of Las Vegas Sands higher by six percent in midday trading. That puts the owner of five Macau integrated resorts on pace for one of its best days in the current quarter.

Outlook Improves for Macau Stocks

Amid heightened regulatory fears and slow-moving action on border reopenings — the latter of which is fostered by China’s zero-tolerance policy on COVID-19 – 2021 has been a miserable for Macau stocks. Analysts and investors are largely displaying preferences for casino operators with Las Vegas or domestic regional exposure over Asia-Pacific fare.

However, that tide could be starting to shift, as market participants look for value in the gaming industry. In a recent note to clients, JPMorgan says Macau’s 2022 gross gaming revenue (GGR) will be just 50 percent of the levels seen in 2019, prior to the coronavirus pandemic. But that forecast is slightly higher than the bank’s prior projections.

Jefferies analyst David Katz adds Macau stocks could be close to bottoming, with the help of the aforementioned China/Hong Kong border reopening, and as daily COVID-19 case counts dwindle to the single digits in many Chinese regions.

The chatter is positively affecting other Macau operators, as Wynn Resorts (NASDAQ:WYNN) is up 2.5 percent at this writing, while Melco Resorts & Entertainment (NASDAQ:MLCO) is higher by five percent.

Good News for LVS

While Macau’s 2022 GGR is slated to be well off pre-pandemic levels, the silver lining for Sands is that JPMorgan is forecasting a 70 percent recovery in the mass market segment — LVS’s core constituency in Macau. That’s far ahead of the 24 percent rebound the bank is estimating for the VIP demographic.

Some well-known investors are stepping into LVS shares as of late. That’s a positive sign, but the operator has room to further excite market participants.

Some analysts believe management should show investors the stock is undervalued by committing to a sizable buyback program. LVS has the resources to do that, but it’s not immediately clear of shareholder rewards are a top near-term priority for the company.