Sands, Wynn Extend Rallies as Guangdong Reveals IVS Restart, Rest of China Following in September

Posted on: August 11, 2020, 10:08h. 

Last updated on: August 11, 2020, 11:07h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

On Tuesday, shares of Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) soared again. The stocks surged with news that Guangdong province will again issue individual visit scheme (IVS) travel permits on Aug. 26. Other mainland China regions join the party on Sept. 23.

Stocks Surge On IVF Renewal
Macau is likely to get much busier over the near-term after Guangdong signed off on reissuance of IVS visas. (Image: Bloomberg)

The news brings much-needed clarity on IVS policy. Macau officials and concessionaires were hoping for guidance since integrated resorts in the world’s largest gaming center were shuttered for 15 days in February. Issuance of those travel permits was halted late last year in advance of President Xi Jinping’s visit to the special administrative region (SAR). But it was expected Beijing would lift that freeze early this year. That was before the coronavirus hit.

News that Guangdong will soon resume granting IVS permissions emerges just a day after Zhuhai. a city in the province, said it would start issuing tourist visas again. The news is also a pleasant surprise because some gaming executives recently speculated that the earliest Beijing would greenlight new IVS issuance would be September.

There’s no denying investors like today’s news. In midday trading, LVS, the largest Macau operator, is higher by 5.70 percent, while Wynn is up more than six percent. Melco Resorts & Entertainment (NASDAQ:MLCO) is higher by four percent on volume that’s already more than double the daily average.

It’s a Big Deal

IVS access for residents of Guangdong, the mainland province closest to Macau and home to approximately 113 million citizens, is vital for the gaming hub’s rebound aspirations.

Last year, nearly half of all visitors to the casino center arrived from Guangdong, and of those, 72 percent did so on IVS permits. On Aug. 26, group visas will also be issued again, but parties from regions deemed medium to high-risk for COVID-19 will be denied.

News of wider-ranging IVS resumption comes less than two weeks after the Macau Inspection and Coordination Bureau (DICJ) said July gross gaming revenue (GGR) slid 94.5 percent, extending a streak of monthly declines in excess of 90 percent.

Pent Up Demand

With IVS policy loosening up, concessionaires’ theory that there’s pent-up demand will be tested. Analysts, some of whom were surprised by the Tuesday announcement, agree there could be a significant near-term bump in visits to Macau, while noting prior estimates could now prove too conservative.

Recall, Macau is the only city outside mainland to/from which mainland Chinese can freely travel without quarantine,” according to JPMorgan. “Now, the only meaningful ‘unknown’ is timing of the Hong Kong SAR border/quarantine easing, as demand from Hong Kong probably comprised ~10% of pre-COVID GGR, per our rough estimates.”

Prior to today’s IVS announcement, JPMorgan forecast August and September GGR declines in Macau of 85 percent and 70 percent, respectively. They noted it would be sometime in the fourth quarter before turnover returned to 60 percent of 2019 levels.