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Macau Gaming Stocks Rally, After This ‘Overhang’ Lifts

Macau-focused gaming stocks like MGM Resorts International (MGM), Las Vegas Sands (LVS) and Wynn Resorts (WYNN) rallied Friday, after regulators of China’s gambling hub settled on new measures surrounding licensing and other matters.




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Taken together, the regulations appeared less harsh than anticipated by some investors. The new rules still need to be passed by the Macau legislature. However, they appeared to provide some closure after months of hand-wringing over the regulatory state of an industry dented by the pandemic and a crackdown by Chinese officials. Prior to the release, gaming licenses in Macau were set to expire by June.

The proposed measures would limit the total amount of gaming licenses handed out at six, according to a government announcement on Friday. However, they would cut the duration for casino licenses to 10 years, from 20. Many had feared a shortening to five years.

The rules would also reduce the extension periods on those licenses and increase local ownership of casinos to 15% from 10%. And they would put a limit on the public-share float of license holders.

But the rules for the gaming stocks would keep the tax rate the same. And they would not require a government official to sit on the casino operators’ boards — a possibility once under consideration.

B. Riley gaming stocks analyst David Bain, in a research note on Friday, said the bill “helps to remove a substantive overhang” for the six licensed operators in Macau: Wynn, Sands, MGM, Melco Resorts & Entertainment (MLCO), Galaxy and SJM.

Gaming Stocks Run Higher

Gaming stocks with Macau exposure moved higher in early trade on the news. MGM popped early in the stock market today, but closed with a slim 0.5% gain to 44.47. The stock was in a consolidation with a 51.27 buy point.

Wynn jumped 8.6%. Las Vegas Sands climbed 14%. Melco Resorts sailed nearly 17% higher.

“While the weak operating environment of Macau should persist due to start-and-stop COVID restrictions and a somewhat disorderly unwinding of the VIP market,” Bain said. He added: “for those more interested in the long-term mass gaming and overall ‘Macau story,’ today’s announcement should be taken as welcome news, in our view.”

Macau, a special administrative region of China, has faced pandemic-related restrictions on visits from mainland tourists. Gaming stocks like Sands, Wynn and Melco fell steadily last year.

China has also tried to diversify Macau’s economy, and curb shady lending practices, money laundering and the underground flow of cash into the region and out of the mainland. Worries about the region increased after the arrest late last year of Alvin Chau, CEO of Suncity Group, a large junket operator providing credit to VIPs.

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