Research trip: Macau and Hong Kong

Research trip: Macau and Hong Kong

By Kevin Bertoli, PM Capital

Key points:

•    Earnings recovery in Macau well underway, although pace of recovery varies amongst operators creating opportunities for investors.

•    Recently announced regulatory changes are positive for the gaming sector and highlight ongoing government support for the industry.

•    Macau’s status as a regional gaming destination remains intact; coupled with the existing favourable market structures, it ensures the six concessionaries are ideally placed to capture the long-term opportunity.

•    Valuations of PM Capital’s key casino holdings remain attractive.


In May 2024, Paul Moore and I travelled to Macau to meet with our casino holdings and see firsthand some of the recent investments made in the gaming enclave. While in Asia we also held meetings in Hong Kong with various economic and industry experts to gain insights into the health of China’s economy more broadly. Trips such as these form an important part of PM Capital’s research process and are vital in developing our investment insights. 

PM Capital has invested in the Macau casino sector on several occasions since the former Portuguese colony opened up its gaming industry to competition in 20021, both through the ownership of US-listed casino companies that have majority controlled subsidiaries operating in Macau (such as Wynn Resorts or Las Vegas Sands), as well as directly in local subsidiaries (Wynn Macau, Sands China, MGM China Holdings) that are listed in Hong Kong. At 30 June 2024, 8.8% of PM Capital’s Global Companies Fund was allocated to gaming companies that have exposure to the Macau market.

1. Earnings recovery underway, although the pace of recovery varies

While in Macau, we visited all the major casinos in both Cotai and the Peninsula area of Macau to gauge patronage, and explore the recent upgrades and additions made to properties post COVID-19. Our anecdotal observations confirmed positive industry trends and company reports on recent Macau activity.

In May, two of our holdings reported first-quarter earnings that beat consensus expectations. MGM China reported a record first-quarter result with its adjusted EBITDA rising 77% compared to the same quarter in 2023 and 15% sequentially from the December quarter of 2023. MGM’s market share in Macau climbed to an all-time high of 17% in the first quarter of 2024, from 15.2% in 2023 and 9.5% in 2019. 

Since Macau’s reopening from COVID-19 in early 2023 MGM China has been a standout performer with the market consistently underestimating the company’s impressive market-share gains. A successful reinvestment program – a reconfigured casino floor, investment into premium lodging (Mansions), cost effective promotions and early investment into technology via smart tables – have all contributed to this success. MGM China’s two casinos, MGM Macau and MGM Cotai, were both among the busiest casinos that we visited. 

Image 1: Cubism on steroids! MGM Cotai – the standout casino property since Macau’s COVID-19 reopening.

MGM Cotai

Likewise, Wynn Resorts, also reported a record 2024 first-quarter result with EBITDA at its Macau properties 118% higher compared to the 2023 first-quarter and 14% quarter over quarter. While Wynn’s Macau earnings have rebounded strongly over the past year, they still only equate to 88% of that achieved before COVID-19, suggesting its recovery has further to run. 

Wynn’s Macau market share at 13.5%2 is less than MGM China’s despite the former having a larger room inventory and catering to an ultra-premium clientele. We believe there is upside to Wynn’s market share in coming years. Wynn has been most disrupted by the loss of the VIP junket business in Macau – this we do not believe returns – but given the quality of its casino product, Wynn are well placed to capture this business through direct play within the market.

Image 2: Undisputed leader in luxury! Wynn Palace opened in 2016. This property. designed and developed by Steve Wynn. once again showcases Wynn Resorts’ unmatched luxury offering.

Wynn palace

Our third holding in the sector, Sands China however, has been an outlier in 2024. Its adjusted property EBITDA in first-quarter 2024 missed market estimates increasing only 53% year over year and actually declining 7% compared to the figure achieved in the final three months of 2023. 

As Macau’s largest casino operator, Sands China relies more on mass-market casino patronage, compared to MGM China and Wynn Macau, which have a greater focus on premium players. Predictably, the mass-market casino segment has been slower to recover after COVID-19 compared to the premium segment. Sands China was also affected by disruptions from its Londoner hotel and casino redevelopment, which has reduced room inventory and events at its Cotai properties.

Image 3: Is that Big Ben? Sands China’s Londoner Casino – major renovations at the property will continue through 2024 and early 2025. Reinvestment into the property will reposition it to better cater to premium customers.

Londoner Casino

Sands China’s results suggest Macau’s casino recovery will be uneven, with MGM China and Wynn Macau currently ahead in their recovery after COVID-19. Also, 2024 is a transition year for Sands China as it invests more compared to other Macau operators – a strategy that could potentially increase its market share in coming years.

Despite the operational improvement observed during the recent results announcements, shares in Sands China and Wynn Resorts have fallen this year, while MGM China has rallied3. Weakness in Wynn Resorts shares is partly due to concerns over the elevated level of earnings coming from their US properties as the US economy slows and consumer sentiment there weakens. We expect MGM China, Wynn Resorts and Sands China will see free cash flow over the next few years inflect higher, as the Macau market continues to recover and capital expenditure remains controlled.

2. Regulatory changes impacting visitation schemes positive for the sector

In late April 2024, China’s National Immigration Administration announced a range of measures to make it easier for more Chinese citizens to visit Macau.

China added eight cities to its Individual Visit Scheme (IVS) exit visas to travel to Macau and Hong Kong, following the addition of two cities in February that took the total to 59. The IVS program allows Chinese citizens from designated mainland cities to visit Hong Kong and Macau individually (people from cities without an IVS can only visit through authorised tour groups). 

The 10 Chinese cities added this year have a combined population of more than 45 million. Designated cities in the IVS program tend to supply more visitors to Macau, which bodes well for future casino patronage.

Separately, China is considering a new visa category for mainland Chinese citizens that would allow multiple entries between Macau and nearby Hengqin Island. Sitting directly opposite Macau, Hengqin connects to Macau’s reclaimed Cotai area through the cross-border Lotus bridge. 

Image 4: Macau & Mainland China (Zhuhai) is separated by a narrow coastal waterway, less than 1km wide. Gaming in Macau is separated into two distinct areas, Macau Peninsula (old town) and Cotai. Cotai is located directly opposite Hengqin Island, Zhuhai, China.


If we look at the development of Las Vegas over the past four decades, growth in hotel room capacity has been essential to facilitating growth in the market. Today Las Vegas has over 150,000 hotel rooms; Macau has 40,000 hotel rooms today. Hengqin has the potential to help address a long-term bottleneck in Macau’s hotel supply, and facilitate growth in visitation. 

Hengqin has approximately 10,000 hotel rooms and a number of non-gaming amenities, the most notable being Chimelong tourist resort and theme park, but importantly there is scope for significantly more capacity. Allowing visitors to Macau to make multiple round trips between Hengqin and Macau during a seven-day period is essential if Hengqin is to play a role in Macau’s growth overtime. 

These and other proposed regulatory changes reinforce China’s commitment to grow Macau. The Chinese government appears to be accelerating regulatory reforms to boost Macau’s recovery after COVID-19, stimulate the country’s tourism sector and aid its slowing economy. 

3. Long-term thesis intact

Macau casino stocks have faced a long list of challenges: China’s anti-corruption crackdown in 2014/15; the COVID-19 pandemic in 2020/23; uncertainty over Macau casino licence renewal and gaming-law revisions in 2021/22; and today concerns over China’s slowing economy. 

Our visit also reconfirmed our belief that Macau will continue to be the preeminent gaming destination in Asia into the future and there remains a significant growth opportunity over the coming decades. Our investment thesis centres on four key factors. 

First, Macau continues to cater to a large and growing addressable market, primarily from within Greater China population and the growth in middle-class consumption there, but also from the wider region. 

Second, despite the large addressable market penetration remains relatively low by global comparisons. Visitation will be supported by continued investment in infrastructure. China has and continues to invest heavily in the infrastructure needed to support Macau’s development. The Hong Kong-Zhuhai-Macau Bridge, which opened in 2018 is a great example of this. The investment in infrastructure, hotel room capacity as well as favourable government visa policies further highlight the importance of Macau to China’s tourism sector. 

Third, we like the industry’s defined competitive landscape with six operators granted concessions by the Macau Government to operate until December 2032. By definition these six operators essentially capture all the growth in the market and we believe this structure is conducive to strong margins, returns and free cash flow generation over time.

Fourth, Macau is backed by reputable casino operators with long-term track records which gives us confidence in terms of capital allocation decisions. Wynn Resorts (majority owner of Wynn Macau), Las Vegas Sands (majority owner of Sands China) and MGM Resorts International (majority owner of MGM China) control in excess of 50% of the market.

These four factors have led to Macau’s existing casinos delivering attractive historical returns on investment, something we think can continue to be replicated into the future.

4. Valuations         

We believe current market valuations for MGM China, Wynn Resorts and Sands China continue to underestimate the recovery underway in Macau and their long-term growth prospects.

Based on FY24 consensus market estimates, MGM China trades on a Price Earnings (PE) multiple of 9.7 times while Wynn Macau, Wynn Resorts’ Hong Kong listed subsidiary, trades on 10.2 times. Sands China trades on a slightly higher 12.9 times (PE) but we expect their earnings growth to accelerate into 2025 as renovation disruptions dissipate4.

Importantly we also expect shareholder returns through increased dividends to be a major catalyst for the sector moving forward now that balance sheets have been repaired post COVID-19 and capital expenditure commitments remain manageable. MGM China and Wynn Macau both announced the resumption of their dividend at their 2024 results. Macau’s casino operators could comfortably be paying out 80%+ of their earnings in the years to come which equates to high-single-digit dividend yields. 

In our view, current valuation metrics do not look overly demanding given the near-term growth potential as the casino sector recovers, the potential for consensus estimates for FY25 earnings to be raised, and Macau’s long-term growth story.


About the author

Kevin Bertoli is Co-Portfolio Manager of PM Capital’s Global Companies Fund and Australian Companies Fund. More PM Capital insights are available here.



1 In 2002, the Macau Government ended the monopoly rights of Sociedade do Jogos de Macau to all forms of gambling there and granted three (later to become six) licences to foreign and local casino companies

2 At the end of first-quarter 2024

3 From 1 January 2024 to 30 June 2024

4 FacstSet consensus at 30 June 2024



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