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Can New Resorts Lead the Way to Recovery for Macao Casinos?

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Integrated resorts help in recovery

Sands Parisian opened its resort in September 2016 and has been leading the mass market recovery ever since. Wynn Resorts (WYNN) opened its $4.1 billion Wynn Palace on August 22, 2016.

Given the fact that Macao’s revenue growth in the past five months coincides with the opening of integrated resorts, analysts are attributing the recovery success to these new resorts.

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New resorts lined up at Macao

The overall industry capacity has grown by about 60% in 2016 with key players having invested more than $28 billion in the new developing Cotai Strip. The trend is expected to continue in 2017 with more resorts lined up, which is probably why the Cotai Strip is integral for casinos’ recovery.

MGM Resorts (MGM) is expected to open its $3.1 billion MGM Cotai in early 2017. SJM’s resort is also expected to open mid-2017. Galaxy Phase 3 & 4 may come up in 2018.

How critical are new resorts?

The impact of new resorts will be critical to determining Macao casinos’ success in 2017. So far, these new resorts have helped change the casino market share. Sands China, Wynn Resorts, and Galaxy Entertainment, which have opened new resorts, are leading the pack, while MGM China and SJM are lagging behind. These new resorts are expected to contribute to positive revenue trends in 2017.

Investors seeking diversified exposure to casino companies may be interested in ETFs that invest in casino stocks like the VanEck Vectors Gaming ETF (BJK). Investors can also invest in the WisdomTree Dividend ex-Financials Fund (DTN), which holds 1.6% in LVS.

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