By Yi Wei Wong
Hong Kong-listed casino stocks fell Monday morning after Macau said it would begin mass Covid-19 testing following an outbreak of Covid-19 cases in the Asian gambling hub.
Sands China Ltd. shares slid 3.9%, while Wynn Macau Ltd. lost 5.2% and SJM Holdings Ltd. shed 4.4%. Melco International Development Ltd., MGM China Holdings Ltd. and Galaxy Entertainment Group Ltd. declined 4.4%, 3.0% and 1.4%, respectively.
Macau said Sunday that it would begin testing after news of the city’s first Covid-19 outbreak in eight months. Health authorities said 31 cases have been detected in the territory.
While casinos won’t close as a result of the outbreak, the city’s visitor numbers will be significantly limited given Macau is following China’s zero-tolerance approach to Covid-19, AllianceBernstein analysts said in a note. City officials have already ordered mass testing for all individuals and shut down various parts of Macau.
The outbreak will also place severe pressure on the liquidity of the city’s six licensed casino operators, which mean operators may require more capital injections from either capital markets or controlling shareholders to maintain cash balances of at least 5.0 billion Macau patacas (US$618 million) to adhere to requirements laid out in the city’s soon-to-be-passed revised gaming law, AllianceBernstein said.
The outbreak is likely to be the largest local community outbreak since March 2020, JPMorgan analysts D.S. Kim and Livy Lyu said in a research note. The investment bank said the market will likely to focus on liquidity concerns in the near term, as gaming revenues are set to plunge to close to zero for at least a few weeks.
JPMorgan said SJM and Sands China have the shortest liquidity runway among the six registered casino operators, but noted that both are likely able to raise fresh liquidity from controlling shareholders.
AllianceBernstein said it maintained a positive long-term outlook on Macau-based casino stocks, with Sands China and MGM China as its top picks. JPMorgan has Sands China as its top pick, citing the company’s cash-rich parent company, and said it also likes Galaxy Entertainment due to its strong liquidity position.
Write to Yi Wei Wong at yiwei.wong@wsj.com
(END) Dow Jones Newswires
June 19, 2022 23:34 ET (03:34 GMT)
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