What’s Priced In to Macao’s Casinos’ Valuations?
On March 28, 2017, the Macao casino industry’s valuation stood at 11.5x, lower than its average of 12.4x in November 2005. In 2016, the industry’s average valuation was 12.1x.
The Macao region relies heavily on the Chinese mainland, as it garners the majority of its visitors and VIP gamers—about 67%—from China and its neighboring countries.
Overall industry capacity rose ~60% in 2016, with key players contributing more than $28 billion to the developing Cotai Strip. This trend is expected to continue in 2017.
Macao’s casinos’ $28 billion investment in integrated resorts is set to change the region’s gaming business.
Macao’s annual inflation fell to 0.37% YoY (year-over-year) in February 2017, a substantial drop compared to January’s inflation of 1.8%.
The Macao government has been trying to remove its economy’s dependence on the casino industry and develop its tourism industry.
The visitor arrivals metric measures the number of people, both locally and non-locally, that visit the Macao region in a given month.
Macao’s unemployment rate was as high as 7% in 2000. Growth in the tourism and gaming industry helped to curb the high rate.
Macao’s casinos reported their seventh consecutive month of revenue growth in February 2017. Casinos’ February revenues rose 18% year-over-year (or YoY) to ~$2.9 billion.
Macao casino stocks continued to gain value in March 2017. In the month, Wynn Resorts (WYNN) was the biggest gainer with a 19.9% rise.
The Macao region relies heavily on the Chinese mainland, as it garners the huge majority (about 67%) of its visitors and VIP gamers from China and its neighboring countries.
As of January 3, 2016, the Macao casino industry valuation stands at 12.6x. This valuation is lower than the industry average valuation of 12.05x since February 2008.
Macao casinos’ $28 billion investment in integrated resorts is set to change the city’s gaming business.
As VIP business continues to remain sluggish, casinos are increasingly turning their attention towards the mass market.
Sands Parisian opened its resort in September 2016 and has been leading the mass market recovery ever since.
The annual inflation in Macao fell to 1.5% in November 2016.
For September 2016 through November 2016, the unemployment rate stood at 1.9%.
For November 2016, visitor arrivals remained unchanged as compared to November 2015 and fell 3.4% month-over-month to 2.6 million visitors.
Macao casino revenues have reported a fifth consecutive month of growth. December revenues rose 8% YoY to ~$2.5 billion.
After rising for four consecutive months from August to November, Macao casino stocks posted losses in December.