China Fully Removes Macau Travel Restrictions, COVID-19 Testing Requirements: Here's How To Play It

On Monday, China officially lifted all travel restrictions and limitations to Macau and scrapped COVID-19 texting requirements.

Macau casino operators are now hoping the end of pandemic restrictions will produce an extended period of pent-up demand among gamblers.

The Numbers: On Monday, Bank of America analyst Ronald Leung said online searches for Macau and Hong Kong on travel sites like Trip.com Group Ltd (NASDAQ: TCOM) jumped more than 300% year-over-year after China announced on Feb. 3 travel restrictions would be lifted starting on Feb. 6. Unfortunately, it might still be a while before Macau fully recovered its pre-pandemic business.

Related Link: Macau Casino Stocks Rally Following License Renewal Set To Begin On Jan. 1, 2023

The Travel Industry Council of Macau estimated Macau could get roughly 20 million total visitors in 2023, about half of the 39.4 million visitors they got in 2019. Leung estimates Macau recovered 80% of its pre-pandemic mass market business during the recent Chinese New Year holiday, but it recovered only 20% of pre-pandemic VIP gaming business during the same stretch.

How To Play It: All four U.S.-listed casino stocks with exposure to Macau are off to a strong start to 2023. Even though travel restrictions have been lifted, Bank of America said investors must still be selective in betting on Macau.

Here is a summary of the firm's current coverage of Macau gaming companies:

• Melco Resorts & Entertainment Ltd (NASDAQ: MLCO), Buy rating, $17 price target.
• Las Vegas Sands Corp. (NYSE: LVS), Neutral rating, $62 price target.
• MGM Resorts International (NYSE: MGM), Neutral rating, $42 price target.
• Wynn Resorts, Limited (NASDAQ: WYNN), Neutral rating, $100 price target.

Leung said top pick Melco has multiple bullish catalysts on the horizon.

"We expect the launch of Studio City Phase 2 and CODM in 2Q23 to be key earnings growth drivers for MLCO in 2023 and 2024," he said.

Related Link: JPMorgan Boosts Price Targets On These Casino Stocks

After recently touring Macau, Leung said labor shortages would likely continue to be a problem in the near term, but additional hotel room capacities would be offered starting in the second quarter.

Benzinga's Take: Macau remained a high-risk speculative investment at this point given recent regulatory crackdowns on U.S.-listed Chinese stocks by both U.S. and Chinese lawmakers.

Macau has tremendous long-term growth potential, but only if the businesses are allowed to open fully and operate at full capacity

Photo: Macau via Shutterstock