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Casino Stocks Stage Mixed Rally As This Overhang Lifts

Casino stocks staged an uneven rally Monday after the Chinese government granted some companies provisional licenses to continue operating in Macau.




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On Saturday, the Macau government renewed the licenses of six incumbent gambling operators, including Wynn Resorts (WYNN), MGM Resorts (MGM), Melco Resorts (MLCO) and Las Vegas Sands (LVS). The incumbents also include self-described “Asian centric” Galaxy, owned by developer Galaxy Entertainment Group, as well as Macau-based SJM Holdings.

The licences will run for 10 years, from Jan. 1, 2023 through Dec. 31, 2033, the South China Morning Post reported Saturday.

The provisional renewal of gaming licenses followed a year-long scramble for the rights to operate gambling venues in Macau, the only place on Chinese soil where casinos are legal. The bidding process launched in July after the largest overhaul of Macau’s gambling laws in decades.

The interim license renewal eases a big negative overhang for Macau-based gaming stocks. Final agreements on renewals are expected in December.

On Monday, J.P. Morgan raised its rating on Wynn Resorts stock to overweight, from neutral. The note boosted the stock’s price target to 91, up from 71.

Meanwhile, Goldman Sachs analysts said Sunday that MGM China has strong global exposure, despite being the smallest operator. That puts it in the best position to bring non-Chinese tourists to Macau, the report said.

Casino Stocks Mixed, MLCO Soars

WYNN stock rose 4.4% to 78.20 on the stock market today, paring back an early 6% surge. MGM stock fell 2.2% to 34.93 Monday, undercutting the 200-day moving average again. MLCO stock rocketed nearly 10% to 7.24, extending a 32% rally in November so far. LVS stock gained 1.1% to 43.66.

On Sunday, Wynn Resorts said it would undertake a capital restructuring. That came a day after Macau’s government renewed the gaming licenses.

Casino stocks have been volatile. In January, B. Riley gaming stocks analyst David Bain called regulatory uncertainty in Macau “a substantive overhang.”

In July, gaming stocks tumbled after Macau — an administrative region in China — began a citywide lockdown to combat rising coronavirus cases.

The stocks have rallied since September. The rally came after Macau signaled an easing of Covid-19 travel restrictions, making it much easier for people to return to the world’s largest gambling hub.

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