Analyst Note| Jennifer Song |
Macao gaming companies have underperformed the broader market over the past two months, with share prices falling 10%-16%, compared with the flat Hang Seng Index. We think this reflects market concern about the rising COVID-19 cases in mainland China and surrounding regions, which may further slow the pace of Macao’s recovery. Despite the near-term challenges, management comments on an uptick in May Golden Week traffic and gradual improvement in month-on-month gross gaming revenue, or GGR, are encouraging. In addition, interest in vaccination is increasing after the pandemic has spiked in several countries over the past few months. The vaccine rollout in mainland China, which contributes about 70% of Macao’s tourism traffic, is also gaining speed, with daily vaccination rates rising to 16 million-17 million doses recently from 4 million-5 million doses two weeks ago. We think China’s target for herd immunity looks achievable by the end of 2021, supporting a foundation for a sustainable recovery of Macao's gaming sector.