Macau casino plays got crushed last year as the sector hit a rough patch, but with the prospect of a recovery increasing, some analysts say now's the time to scoop up these battered shares.
"Waiting until mid-year to begin accumulating positions will have missed a large chunk of upside, so now is the time, as Macau will quickly become a crowded long on the first signs of recovery," said Grant Govertson, principal analyst at Union Gaming, who upgraded the gaming sector to a "buy" from "hold" last week.
The bullish call is premised on hopes that the world's biggest gambling hub will see signs of a recovery in the second half of 2015. Govertson notes that a slowdown in the decline of monthly gross gaming revenue (GGR) – the amount wagered minus the winnings returned to players – beckons a period of stabilization, with the drop in revenue likely to be "less onerous" in coming months.
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GGR in the Southern Chinese territory fell 17.4 percent on-year to $2.97 billion in January, figures from the Macau gaming and inspection bureau showed, marking the eighth consecutive monthly decline. That followed a 30.4 percent plunge in December and 19.6 percent decrease in November on the back of varying factors including a decline in the number of VIP gamblers, regulatory curbs and a smoking ban.
However, share prices will soon rebound, with negative sentiment in the sector likely to bottom this quarter, according to Govertson: "The government has taken various actions to 'reset' Macau and it seems they are back into making Macau the preferred entertainment destination of China."