In a week marked by substantial financial activity, shares of Macau-based gaming operators have seen an impressive average increase of 23.7%, fueled by the announcement of China’s broadest economic stimulus package since the onset of the pandemic. This development, analyzed by experts at CBRE, points to a significant shift in the financial dynamics surrounding Macau’s gaming industry.
Analysis of Macau’s gaming industry performance:
Despite the recent surge, it’s noted that Macau’s gaming stocks have generally lagged behind the broader market, specifically the S&P 500, over the past year. However, CBRE analysts suggest that the sector’s current valuations and future projections hold considerable appeal, indicating potential further growth. They remark on the appealing nature of these valuations even post-surge, with Macau gaming equities currently trading at a forward EV/EBITDA multiple of 9.2x, which is quite a bit lower than the 2019 average of 11.2x.
As GGRAsia reports, analysts John DeCree and Max Marsh noted: “Even after last week’s rally, the average one-year forward EV/EBITDA [enterprise value to earnings before interest, taxation, depreciation, and amortisation] multiple for Macau gaming equities is 9.2 times.”
The stimulus package unveiled by China diverges from past efforts by integrating aggressive monetary policy adjustments. These include reductions in both the short-term benchmark interest rates and the Reserve Requirement Ratio (RRR), marking the first such integrated cut since 2015. This strategic move is viewed as an indication of China’s renewed commitment to stimulating credit flow and economic activity.
Also, the package introduces significant measures to stabilize the real estate market—a critical sector in China, where it represents about 70% of household wealth. These measures include lowering residential mortgage rates and removing some purchasing restrictions, which are expected to bolster consumer confidence and stimulate broader domestic consumption.
Potential impacts on Macau’s gaming sector:
With these economic adjustments, CBRE analysts predict a promising outlook for Macau’s gaming sector, expecting revenue growth of around 7.3% in 2025. This projection is considered conservative by some, given the potential for the stimulus measures to more significantly energize economic activities.
Among the beneficiaries, Las Vegas Sands and Wynn Resorts are particularly well-positioned to capitalize on the anticipated increase in demand and visitor numbers. Las Vegas Sands noted for having the largest hotel and retail presence in Macau, looks forward to favorable comparisons in 2025 as it completes major constructions at its Londoner property. Wynn Resorts, on the other hand, is recognized for offering great relative value in the global gaming market, with expectations of stable support from a recovering Chinese economy, enhancing investor confidence in its long-term growth.
While Las Vegas Sands and Wynn Resorts are highlighted as top picks by CBRE, the broader Macau gaming sector is also expected to unlock substantial value due to the stimulus measures. This optimistic perspective is supported by the sector’s performance even in the context of a challenging past year and is underlined by the strategic economic policies now being implemented by China.
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