Time to bet the house? Macau gears up for recovery
Recovery will look different for each of the enclave's casino operators – we pick out two set to ramp up shareholder returns with high potential for mean reversion
Macau, which boasts 7x the gross gaming revenues (GGR) of Las Vegas, is the only region in China where casinos operate legally. As the oldest European colony in Asia, Portugal returned Macau to the Mainland in 1999. The city retained its laissez faire approach to gaming, as much like Hong Kong, it is a Special Administrative Region with separate laws and customs arrangements to China. Leveraging its permissive regulatory environment and increasing connectivity with the Mainland, the city now attracts millions of visitors each year, primarily from across the border.
Macau was the most internationally visited city in 2016, when it welcomed over 31 million tourists. This has since decreased due to the pandemic, competition from new gaming destinations, and crackdowns on money laundering in China, but it remains a top 10 global destination (18 million visitors in 2024).
A turnaround appears to be underway, with arrivals rising 26% YoY in 2024. In 2022, COVID-19 lockdowns in China raised doubts around casino license renewals and increased debt. However in 2022, licenses for Macau’s six casino operators – Sands China (1928.HK), MGM China (2282.HK), Galaxy Entertainment (0027.HK), Wynn Macau (1128.HK), SJM Holdings (0880.HK), and Melco Resorts (MLCO.OQ) – were renewed for 10 years.
High debt levels continue to spook investors and many concessionaires have yet to restore their net debt-to-equity ratios to pre-2020 levels. Yet these operators are addressing debt levels amid a a gradual recovery in the industry.