Macau plays down but seen as recession-proof opportunities

The chips are down across the board for Macau plays, but some analysts see buying opportunities and the promise of insulation from the broader market turmoil.

'Share prices of the six gaming licence holders in Macau were hammered during the fourth quarter,' Citigroup analyst Anil Daswani wrote last week in a research report. He calculates that the three Hong Kong-listed companies - Melco International Development, Galaxy Entertainment and Shun Tak Holdings - shed an average 27 per cent of their market value, compared with 29 per cent for their US competitors.

'Macau gaming stocks are currently trading at undemanding valuations in our view and could be a good place to hide if the US is hit by a recession,' he said.

Last week, shares in most Hong Kong-listed Macau plays tested their lowest levels in a year. In addition to licensed casino operators, small-cap VIP gambling junket investors like Teem Foundation, A-Max Holdings and Neptune Group have all shed more than half their market value in the past six months.

While valuations of Macau chips are by no means cheap, the across-the-board rout means shares in many companies have come down to levels not seen in more than a year.

The slump has continued despite an announcement last week that gaming revenue surged 46.6 per cent to 83 billion patacas last year, and follows recent Macau press reports that casinos tallied 5.5 billion patacas in winnings during the first two weeks of January and are on pace for a record-setting month.