Shares of Macau casino stocks traded higher on Friday following the release of a new Macau gaming bill that was mostly in-line with expectations but that had at least a couple of bullish surprises for investors.
What Happened? Melco Resorts & Entertainment Ltd MLCO traded higher by 15.8% on Friday morning, while Las Vegas Sands Corp. LVS gained 12.72% and Wynn Resorts, Limited WYNN gained 7.18%.
Related Link: JPMorgan Analyst Upgrades Las Vegas Sands, Optimistic About Macau Gaming License Renewal
The new gaming bill states that the number of Macau gaming licenses will remain capped at six and the licenses may not be transferred. The new licenses will have 10-year terms with the potential for up to a three-year extension.
The minimum required capital for a licensed entity will be $624 million, up from $24.9 million under the previous licenses. License holders must have 15% of capital shares held by Macau directors and no more than 30% of shares floating on public markets.
License holders will no longer need government approval for dividend distributions and will only need to notify the government of major financial decisions that could materially impact the company's operation.
Finally, third-party licensed casinos are no longer allowed in Macau.
Why It's Important: The new bill should reassure investors the government will not be intervening in the Macau casino business to an extreme degree, Bank of America analyst Shaun Kelley said Friday.
Kelley said he expects the Macau junket system will likely be banned completely, but he expects the six current Macau license holders will all secure renewals in 2022.
In the meantime, Kelley said Macau casino stocks have attractive valuations at current levels.
"We remain positive on the Macau gaming sector and believe the long term positive should outweigh the short term negative from COVID disruptions," Kelley said.
Bank of America has the following ratings and price targets for Macau casino stocks:
- Melco Resorts: Buy rating, $14 target.
- Wynn: Neutral rating, $90 target.
- Las Vegas Sands: Underperform rating, $40 target.
Benzinga's Take: Unfortunately for Macau investors, its gross gaming revenue is still roughly 65% below 2019 levels, according to Kelley. Meanwhile, Las Vegas GGR is up 46% from pre-pandemic 2019 levels, suggesting the worst of the pandemic is now in the rearview mirror for Vegas casino operators.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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