Melco, Wynn and Galaxy better positioned for post-Covid-19 recovery – Brokerage

Gaming operators Melco Resorts, Wynn Macau and Galaxy Entertainment Group are better positioned for a post-Covid-19 recovery due to their higher focus on premium mass and VIP players, analysts at Sandford C. Bernstein indicated in a recent report.

‘The early phase of the recovery should be driven by the high end and operators that have relatively higher exposure should outperform others. Melco and Wynn Macau (and to a lesser extent, Galaxy) should outperform in the early stages of the Macau rebound driven by premium mass and VIP recovery,’ the brokerage indicated in a report published today analysing the recovery of the local gaming market.

With no new Covid-19 cases reported in the city for 44 consecutive days, analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu were optimistic that travel restrictions in/out of Macau will be lifted by early June with the Chinese individual visa scheme (IVS) and group visas restart to ‘start soon after in a phased manner’.

These changes were some of the catalysts the brokerage considered essential for a solid recovery of the VIP and mass-market gaming results in the next 18 months, together with continued limitations on international travel and planned new Cotai integrated resorts.

The number of visitors in the first four months of 2020 went down by 76.6 per cent year-on-year to about 3.2 million, with Mainland China visitors going down by more than 70 per cent to some 2.3 million.

Meanwhile, gross gaming revenues have dropped by almost 68 per cent year-on-year in the first four months of this year to some MOP31.2 billion (US$2.9 billion).

Bernstein considered that Melco and Wynn Macau focus on the higher end premium gaming customer and their product positioning offers would give them a competitive advantage over the first few months of a high-end recovery.

Meanwhile, Galaxy and Sands China were considered as having more rounded businesses with more exposure to the mass market, with large-scale offerings to take longer to ramp up.

However, the operators’ future expansion projects gave them more long term potential for 2021, with GEG carrying out its HK$50 billion (US$6.4 billion) Phase 3 and Phase 4 expansions of Galaxy Macau and with Sands China carrying out its US$2.2 billion project to reconvert Sands Cotai Central into the Londoner Macao and its Four Seasons Grand Suites revamp.

‘We continue to view MGM China and SJM more negatively. Execution challenges are of concern as is management,’ Bernstein stated.

The recently announced retirement of MGM China’s CEO Grant Bowie was considered to be ‘earlier than expected’ and with no new leadership announcement yet, while MGM’s Cotai property ramp up was said to have been ‘weaker than expected’ with no ‘major turnaround’ expected.

‘At SJM, the continued delay of opening on Cotai and the execution risk, leave us concerned about ramp-up. We see better opportunities for Macau investment via the other four operators,’ Bernstein added.

In any case, the brokerage estimated that Macau will most certainly see a much quicker recovery than Las Vegas, and therefore US gaming operators with greater exposure to Macau should see better relative performance over the next year.