Searching for green shoots with Macau casino stocks (OTCMKTS:WYNMF)

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The painfully slow recovery in Macau may have taken another step forward after Macau daily revenue for the week ending November 13 was reported to be 37% higher than the first six days of November.

The relative jump in Macau gross gaming revenue was likely tied to mass testing for COVID ended in Macau on November 5, according to Jefferies analyst David Katz. While the sequential improvement is notable, GGR remains at about 14% of the 2019 pre-pandemic level. Katz and team forecast only a gradual pick-up in demand in Macau with COVID restrictions still a major headwind.

Macau revised its non-China arrivals policy to be in-line with Chinese policy to the same "5+3" with five days central medical observation at a designed hotel + three days home isolation for non-China arrivals. While that is an incremental improvement, the case for a burst in international tourism is still far off.

Notably, Jefferies analyst Sean Darby said that is possible that China follows the path of Hong Kong this year in which a progressive move was undertaken to relax social restrictions. Critically, a key difference in how China has dealt with the COVID outbreak since the Communist Congress is that it has put its faith in testing rather than widespread lock-downs that curtail economic activity.

After weighing all the factors, Jefferies' top global picks in the casino sector remain MGM Resorts International (MGM) and Churchill Downs (CHDN) due to growth positioning and balance sheet strength. Among the Hong Kong-listed names, the firm prefers Galaxy and Sands China, although it is acknowledged they require more patience.

Macau casino stocks: Wynn Macau (OTCPK:WYNMF) (OTCPK:WYNMY), Wynn Resorts (WYNN), Sands China (OTCPK:SCHYY) (OTCPK:SCHYF), Las Vegas Sands (LVS), MGM China (OTCPK:MCHVF) (OTCPK:MCHVY). MGM Resorts (MGM), Galaxy Entertainment (OTCPK:GXYEF), SJM Holdings (OTCPK:SJMHF) (OTCPK:SJMHY), Melco Resorts & Entertainment (MLCO), Studio City International (MSC).