CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 87.41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Scan to Download iOS&Android APP

Macau casino stocks: Can Sands and Wynn see further boost from Beijing?

By David Burrows


Updated

Share this article
In this article:
MLCO
Melco Crown
13.62 USD
-0.01 -0.070%
2282
MGM China
10.05 USD
-0.7 -6.730%
1928
Sands China
28.95 USD
-1.65 -5.420%
1128
Wynn Macau
9.10 USD
-0.7 -7.370%

Subscribe to Weekly Highlights

The major market events for the week ahead right in your inbox. Subscribe
Macau casino. Photo: Getty Images
Macau casino. Photo: Getty Images

Macau casino stocks have jumped since early November. Beijing announcing existing licences will be renewed and hopes of an end/easing in covid restrictions are seen as key reasons for the stock rises.

Sands China (Sands China) currently at HK$24 is up over 57% in the last month.  Wynn Macau (WYNN)- currently at HK$7.74 is up 121% over the month.

MGM China (MGM China) - currently at HK$7.13 is up 98% over the month and Melco International Melco International (MLCO)- currently HK$7.88 is up 72% over the month.

Given the high percentage increase is there an argument that the positive noises on licensing and potential easing of Covid restriction are now priced into the stocks?

On closer inspection you could argue that the stock prices, historically speaking, are not inflated at current levels.

Pre-pandemic, Sands China was priced at HK$44; Wynn Macau at HK$21;MGM China HK$17; and Melco International HK$22

All four stocks are still signficantly lower than these pre-Covid price levels. 

While the past month has shown positive momentum for these Macau names, it has been a pretty torrid year – so any bounce now is relative.

Melco International share price chart

Last year, the Macau government pledged to step up oversight of casinos. This hard-line stance wiped more than $20bn off the market value of listed gambling operators, as fears that tight regulations could squeeze margins already impacted by Covid-19.

Casino stocks took one hell of a tumble as investors feared that as licenses to operate in Macau expired and gaming laws were reviewed, casino groups were essentially a high-risk bet.

But the landscape has changed somewhat since then. Last month, Beijing confirmed that the casino licenses of many of the operators in Macau - including all four profiled here - would be renewed. Given the billions of dollars the casino groups have ploughed into the China-owned territory to make it a global gambling centre, there will have been a huge and collective sigh of relief.

What is your sentiment on MLCO?

13.62
Bullish
or
Bearish
Vote to see Traders sentiment!

AMZN

101.60 Price
-0.680% 1D Chg, %
Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 22:00 (UTC)
Spread 0.18

BBBY

2.44 Price
-2.420% 1D Chg, %
Long position overnight fee -0.0308%
Short position overnight fee -0.0137%
Overnight fee time 22:00 (UTC)
Spread 0.05

NVDA

199.79 Price
-1.710% 1D Chg, %
Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 22:00 (UTC)
Spread 0.32

AAPL

144.83 Price
-0.800% 1D Chg, %
Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 22:00 (UTC)
Spread 0.06

Investment in Macau

There is though, a degree of compromise with Beijing’s offer. Those awarded licenses will be obliged to increase the focus on overseas customers and develop non-gaming projects. It is believed casino groups may have to invest something in the region of $12.5bn (combined) and in so doing, diversify Macau’s tourist profile.

The attraction to families and non-gamblers is something that Las Vegas has pursued with theme/water parks, music events, shopping centres and art exhibitions included in the mix.

Lawrence Ho, chairman and chief executive of Melco, gave a clear indication that Beijing’s expectations for casino groups would be satisfied.

“We are committed to Macau and its development as Asia's premier tourist destination," he said in a statement.

Brokers are largely bullish on these casino names right now. Marketbeat has a ‘strong buy’ recommendation for China Sands.  And it has a ‘moderate buy’ rating for Melco International with a consensus price target of HK$11.51.

But there is no indication that brokers are positive on two other stocks in this list - MGM China and Wynn Macau. Perhaps this is not surprising given their financial position. 

Recent research from the FT names MGM China and Wynn Macau as two stocks carrying worrying levels of debt as interest rates are going up.

With its Macau properties hit by Beijing’s zero-Covid isolationism, MGM China’s casinos have been cash-starved, out of reach from both overseas and mainland gamblers.Beijing has also hampered MGM’s ability to attract high rollers by demanding it holds $618m in cash to qualify for the new 10-year licences.

The FT report also shows that while ‘VIP’ gaming had been softening over the years, it was still a big earner for Wynn Macau compared with some of its competitors.

Lockdown hit hard, with huge losses incurred just as the casino needed cash to keep paying staff and to comply with new laws forcing operators to hold large reserves. In June, the company had to borrow $500m from its US parent company, Wynn Resorts, fuelling speculation that casinos were struggling to secure bank financing.

Related reading

Rate this article

Share this article

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Latest Stocks news

Still looking for a broker you can trust?

Join the 480.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading