Macao Is Open For Business: Don’t Bet Against The House

Macao Is Open For Business: Don’t Bet Against The House

  • Macau casinos will reopen on Thursday.
  • Casinos will be ready to cater to the "pent-up demand."
  • One pro suggests Las Vegas Sands is the best play in the space.

Macao, considered to be the world’s biggest gambling hub by a large margin, was given permission to resume operations on Thursday. Chinese people, in particular, are very fond of gambling and there is an obvious “pent-up demand” from lost time, according to Strategic Wealth Partners CEO Mark Tepper.

Las Vegas Sands

Macau casinos were forced to close from the coronavirus outbreak and Chinese gamblers missed out hitting up the tables and slots during the “biggest time of the year,” the Chinese New Year, Tepper said on CNBC’s “Trading Nation.”

Investors can gain exposure to Macau’s gambling market through several stocks. Tepper said he prefers Las Vegas Sands among its rivals. The company derives 63% of its revenue in Macau and another 22% in nearby Singapore.

However, investors shouldn’t expect Chinese consumers to double-down on their gambling activity and any lost revenue potential from the virus is gone for good. The stock’s decline from near $75 per share at the start of 2020 to its current level of around $69 already factors in the lost revenue.

“In my opinion, the hit is priced in already,” he said.

Las Vegas Sands is also a good long-term investment as it’s positioning could benefit from a growing middle class that likes to gamble. The Chinese middle-class population continues to make “more and more money, year after year after year.”

Finally, Las Vegas Sands operates a more mass-market type of gambling environment which is a more profitable segment compared to Wynn Resorts which is known to cater to VIPs.

Alternative Casino Bet: MGM

Bill Baruch, Blue Line Capital president, added to the “Trading Nation” conversation that the impact from the coronavirus in Macau casinos is unclear. As such, investors may consider moving away from the region and focus on a U.S. name: MGM.

The U.S. gambling market is in the early stages of adopting sports betting and MGM has a “little bit of a lead” in the emerging category. 

However, MGM, along with other gambling names aren’t showing any technical support on their respective stock charts. As such, investors looking to buy any of the gambling-focused names are essentially “taking a shot in the dark” and hoping for a bounce back.

Among the major casino names, MGM is showing strong support at the $28 level and only at that level Baruch said he would show interest.

“If we see another downdraft I’m looking at MGM at $28 and that’s where I’d look to be a buyer,” he said.

By Jayson Derrick
Jayson Derrick has been writing professionally about stocks since 2011. He is particularly interested in alternative investments, hedge funds, and activist investing. He is a big fan of NHL hockey and lives in Montreal, Canada with his wife and four year old daughter.

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