Analysts’ optimism with regard to Macau’s casinos has been dashed as financial experts have weighed the risks and concluded that the special administrative region is in for a very difficult spell. Financial experts from Credit Suisse cautioned against buying Macau casino stocks, warning that buying such assets could result in unpredictable and dangerous investment scenarios.
Macau Stocks Not Good Investment Right Now
Analysts Kenneth Fong, Lok Kan Chan, and Sardonna Fong took into consideration the most recent shutdown of Macau casinos, which will now remain shuttered through July 18. There is also the raging COVID-19 infection that has infected more than a thousand people, and China’s zero-COVID policy which makes it harder to guess when concessionaires can reopen.
Even when they do, they are very unlikely to generate any revenue. This is the first time casinos in Macau have shut down since February 2022, but gross gaming revenue is unlikely to end up picking up much through the rest of this year. However, not all is lost.
Better times ought to be coming in the first quarter of 2023, the analysts say, but this does not mean that investors should jump on stocks. However, the analysts do admit that there may be room for “an upcycle with higher certainty” if recovery begins to materialize.
The short-term outlook is ominous, though, with the Omicron variant now rampaging through the SAR, thus making it incredibly unlikely to see any meaningful change. The biggest issues with that are that China would not reopen the border with Macau unless there have been 14 days of no COVID-19 cases. Even in the best possible case, this would mean at least a few months if the SAR managed to reign in the infection rates.
Concessionaires Still Good on Liquidity
Meanwhile, JP Morgan’s DS Kim and Livy Lyu have been assessing how prepared concessionaires are for the new storm. Liquidity has been an issue for some of the companies, particularly SJM and Sands, which are said to only have reserves to last them through March 2023.
This should be enough, JP Morgan reckons. However, Wynn, Melco, and MGM all seem to have anything between 1.5 and 2 years’ worth of leftover liquidity. Galaxy, though, is the leader in this category with some five years’ worth of time before the company starts running into any sort of trouble.