Making her debut covering Macau-facing stocks for Jefferies Equity Research, analyst Anne Ling highlighted Galaxy Entertainment and Las Vegas Sands as the companies most likely to benefit from a Macanese recovery. She posited this in a November 21 investor note.

Ling wrote that she expects a normal rate of gross-gaming-revenue (GGR) growth, “broadly in line with China’s nominal GDP growth.” The key driver, she predicted, will be mass-market players, especially higher-income ones.

The analyst gave Buy ratings to Hong Kong-traded stocks of four of the six concessionaires: Sands, Galaxy, Wynn Resorts, and MGM International. She rated SJM Holdings a Hold and gave no opinion on Melco Entertainment.

“Our top pick is Sands China, given hotel capacity increase, and efficiency gain,” Ling added.

The 2023 concession renewal of the incumbent operators heralded, in Ling’s view, a new era of diversification and wider international appeal. “On top of that, operators’ focus are on luring premium mass customers with all rounded services,” she wrote.

In spite of weak Chinese consumer confidence, Ling found Macanese GGR to be sturdy, at 70 percent of pre-COVID volume. She predicted a 24.6 percent rise in gambling revenue, atop a 23.6 percent increase in visitation to 35 million this year. She projected gambling win of $27.9 billion.

Ling forecast GGR growth of eight percent next year and seven percent in 2026, as Macau casinos reach 89 percent of their pre-pandemic amplitude. She added that her prognostication was in line with the Macanese government’s own.

The analyst predicted a five percent increase in tourism, along with new private- and public-sector-funded amenities such as a new 50,000-seat outdoor stadium, and the 15,000-seat Venetian Arena. Both open in December.

Also cited as prosperity drivers were new higher-end suites (like those at Sands’s The Londoner and Galaxy’s Capella Hotel) to draw premium-mass players, and “no further deterioration in consumer sentiment with economic development being one of the key priorities for China government.”

Ling also forecast a rearrangement of Macanese market share, with the Capella and Londoner rollouts prompting a two percent share gain by their respective operators. All other operators were predicted to lose share.

The ongoing return of players “should bode well for operators with large hotel capacity like Sands China and Galaxy,” Ling explained. As for SJM’s holding pattern, she continued, “It needs more time to beef up its property margin through improving its casino revenue and increase the players’ mix for its hotels” at the Grand Lisboa Palace megaresort.

The report observed that Sands had added 300 suites to Londoner Grand Casino (the former Pacifica) and had 1,000 more in train with the Londoner Conrad rebranding. Of Sands, Ling wrote that its “assets are built for scale and huge throughput. Thus, a continued increase in visitation (return of base mass at some point), with upgraded assets (for premium mass) should help Sands China in improving its already respectable property margin in 2025/26.”

Ling added that Macau casino stocks had been collateral casualties of investor disappointment with Beijing’s economic-stimulus measures. “The recent stimulus policy announced by the Chinese government did not touch on direct stimulus on consumption.”