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Las Vegas resort operators close Macao casinos amid coronavirus threat

Updated February 4, 2020 - 5:34 pm

The three Las Vegas companies operating resorts in Macao say they’ll comply with Chinese government orders to close their casinos for at least 15 days— while leaving hotels and restaurants open — in an effort to control the rapidly spreading coronavirus that has killed more than 400 people.

Representatives of Las Vegas Sands Corp., Wynn Resorts Ltd. and MGM Resorts International said they would back Chief Executive Ho Iat-seng’s decision to close casinos after a second casino worker, a 29-year-old woman employed by the Galaxy Macao, was confirmed to have the virus.

According to a report by the South China Morning Post, the victim believes she was infected at a private Lunar New Year party and might have exposed co-workers in employee lounges and by riding employee shuttles.

The 2,200-room Galaxy Macao is on the Cotai Strip near properties operated by Sands, Wynn and MGM.

“It was a hard decision, but we must make it for the health of Macao residents,” Ho said in the Post report. “Macao can still withstand economic losses.”

The casino closures began at midnight Tuesday in Macao.

Analysts indicated it was too early to determine how the closures would affect each company since it’s possible the closures could go longer if the virus continues to grip China. In a conference call with analysts last week, Sands executives acknowledged that visitation was off as much as 80 percent during the Lunar New Year holiday period, when activity normally soars.

Ho said the casino closures are part of a broader order that included 18 different types of businesses, including bars, movie theaters, massage parlors, fitness centers, internet cafes, beauty parlors, arcades, nightclubs, bowling alleys, karaoke venues and discos.

Importance of Macao

Nevada gaming regulators also are watching the situation in Macao.

“The Nevada Gaming Control Board continues to monitor this unfortunate situation as Nevada and Macau share three gaming licensees,” state Gaming Control Board Chairwoman Sandra Morgan said in an emailed statement Tuesday.

Operations in Macao are important to Las Vegas because the three local companies generate most of their revenue from the casinos in the Chinese enclave.

A representative of Sands — the largest operator in the Macao market — indicated Monday night that the company would comply with the decision and was awaiting further information from the government.

“In collaboration and cooperation with the Macao government, Sands China Ltd. is temporarily closing its casinos effective midnight Tuesday, for a duration of 15 days,” Sands spokesman Ron Reese said in an emailed statement.

“The health and safety of our team members and guests remains our No. 1 priority. Our team members in Macao are the heart of our organization and we are committed to ensuring their safety and minimizing the impact of this necessary, temporary measure.”

He noted that the company’s hotels, malls, dining and other facilities remain open.

Sands executives acknowledged the possibility of a shutdown last week in the company’s earnings conference call. Wynn Resorts’ earnings call is scheduled for Thursday and MGM’s will be Feb. 12.

Wynn Resorts, in an emailed statement, said “Our greatest concern and our top priority is the health and safety of our employees, their families and the citizens of Macao.

“We support the government’s decision to prioritize public safety and temporarily suspend the operations of all of Macao’s gaming areas, which we believe is in the best long-term interests of everyone concerned,” Wynn spokesman Michael Weaver said in the company’s statement. “We will fully cooperate and comply with all government directives and recommendations.”

MGM also said it would follow the government’s directions.

“We are closing our casinos and gaming areas, while maintaining non-gaming facilities to support hotel guests in both of our properties,” spokeswoman Debra DeShong said in an emailed statement. “We will continue to work closely with the Macao government as the situation progresses.”

Stock prices climb

The companies’ stock prices fared well on Wall Street despite the casino closures. All issues traded with volume slightly higher than the daily average.

MGM stock was up $1.04, 3.3 percent, and moved up an additional 8 cents, 0.2 percent, in after hours trading to finish at $32.33 a share.

Wynn shares climbed $4.12, 3.2 percent, but fell $1.20 after hours, 0.9 percent, to end at $131.50 a share.

Sands was up $1.28, 1.9 percent, but dropped 9 cents after hours, 0.1 percent, to finish at $67.75.

Share prices were up $1 to $2 earlier in the day as investors apparently viewed the situation as an opportunity to capitalize when the casino closures end and the market rebounds — a strategy suggested by some analysts.

“Since these events are generally transitory in nature, we view this as a unique buying opportunity for Macao gaming stocks trading below historical average multiples,” John DeCree of Las Vegas-based Union Gaming said in a note to investors.

DeCree said the opportunity comes at a time when “casino REITs and U.S. regionals provide a solid flight to safety option that are both benefiting from secular tailwinds, including cap rate compression for casino real estate, low interest rates, and the expansion of sports betting in the U.S.”

Analyst Angus Chan of UBS Financial told investors the impact would be greatest in Asia, where stocks initially plummeted after closures were announced.

“In February, with the decline in visitation and the casino suspension for a minimum of two weeks, operators are likely to be loss-making for the month,” Chan said. “It’s uncertain what might happen post the two-week suspension period, which is likely dependent on the status of the development of coronavirus cases in mainland China.”

Analyst David Katz of the New York-based Jefferies Group said the shut-down order wasn’t unexpected.

“The announced closure of the Macau casinos for two weeks is not all that surprising and prospectively included in estimates and stocks,” Katz said in a note to investors. “Our assumption, and we believe that of the market, is that operations ramp over time and the impact is confined to the first quarter of 2020, which may or may not prove correct, but is supporting stocks. The risk remains that the issue endures and impacts economic activity for portions of the remainder of 2020 and therefore volatility remains.”

The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson. Las Vegas Sands operates several casino resorts in Macao.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

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