HONG KONG, April 14 (Reuters Breakingviews) – Macau, once the world’s largest gambling hub, is far from a sure bet. Casinos are open for business in the territory, where gross gaming revenue has revived to around half of pre-pandemic levels, topping $4 billion in the first quarter. But there’s little consensus on what will happen next.

Analyst estimates reveal a stubborn gap between bulls and bears. The most optimistic recent forecasts for the six operating companies’ top line in 2023 are almost double the most pessimistic, according to Refinitiv. The gulf in price targets is wide too. For MGM China (2282.HK) and Sands China (1928.HK), the highest is two-thirds more than the lowest, for example.

Uncertainty is compounded by onerous obligations companies have to help Macau reduce its dependence on gaming. They are splurging on everything from water slides to spas. New licence agreements commit them to investing $13 billion on non-gaming activities and courting more visitors beyond the mainland, where President Xi Jinping’s common prosperity push is taking aim at excessive individual incomes.

A water park or garden might act as an additional draw for punters picking between resorts. Yet it’s unclear if such novelties will add to companies’ bottom line. A plan to foster medical tourism requires entirely new areas of expertise.

An acute shortage of labour is another complication. Attractions and hotels are operating at limited capacity, and some are unable to open at all: Melco’s popular House of Dancing Water show could be out of action until 2024. The empty theatre’s performance pool has instead hosted scuba-diving lessons.

Before the pandemic, Hong Kong-listed stocks MGM China, Sands China and Wynn Macau (1128.HK) offered average total annualised returns of 32% between 2017 and 2019, compared to less than 14% for their U.S.-listed parents, according to Refinitiv. Over the past two years the trend sharply reversed.

The American-traded entities offer less uncertainty and more exposure to other compelling destinations like Las Vegas and Singapore, as well as new markets. Take $16 billion MGM Resorts International (MGM.N), whose Japanese resort received a green light on Friday. It owns 56% of the Macau subsidiary. There’s also $13 billion Wynn Resorts (WYNN.O), which is pushing into the fast-growing United Arab Emirates.

The Chinese hub wants operators to diversify; investors might do the same.

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CONTEXT NEWS

Macau’s gross gaming revenue rose to 34.6 billion pataca ($4.3 billion) in the first quarter, up 95% from a year earlier, according to data released by the Gaming Inspection and Coordination Bureau on April 1. That compares with 76.2 billion pataca in the first quarter of 2019.

Editing by Una Galani and Thomas Shum

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