Portfolio | Some Macau game operators to benefit, but entire sector still under pressure

Macau’s gaming operators including Sands China and Galaxy stand to benefit from the chief executive’s decision to support integrated resort development, Jefferies’ analysts said, while the whole industry, especially players engaged in the high roller business are not expected to recover anytime soon.

Macau’s Chief Executive Fernando Chui said on Tuesday that the government would put more efforts to diversify the local economy and accelerate building the city into a travel and leisure destination in the world, as he delivered proposals for the next year to local legislators.

“One bright spot for the gaming sector from the policy address is that the government will push for (the) large integrated resort model for gaming operators and encourage more travel and leisure related non-gaming projects,” Jefferies said in a note.

“The government is pursuing more mass related business and targeting to change Macau to an international travel destination instead of a casino hub…We believe Galaxy, Sands China and Melco Crown are well-positioned to benefit from the policy.”

They noted VIP business should remain challenging, after the authority issued an internal instruction to regulate the junket sector in October after the Dore’s incident. There will be further rules to regulate the junket system and VIP operations.

Hong Kong-based investment bank Daiwa Capital Markets published a report in September saying as much as HK$258 million had been stolen from a junket named Dore operating inside Wynn Macau.

Nomura’s analysts said in note issued on Wednesday that “Macau, especially VIP Gaming, is not out of the woods yet”.