The gaming exchange traded fund is on a roll, with Citi Research maintaining a “maximum bullish” stance on the sector as Macau gaming revenue surges this year.
Since bottoming out on Feb. 5, the Market Vectors Gaming ETF (NYSEArca: BJK) has gained 10.4%. BJK is up 2.2% year-to-date. [Gaming ETF Cools Ahead of Lunar New Year Revelry]
Citi projects Macau’s gross gaming revenue will surge 22% this year based on January and February numbers, reports Shuli Ren for Barron’s. Macau’s January and February combined revenue has been a good indicator for annual returns.
“Since 2005, Macau’s Jan/Feb combined GGR on average has represented 15.1% of its full-year GGR,” analysts Anil Daswani, George Choi, Raymond Choi and Solomon Chuen said. “This relationship holds true for seven out of the past nine years (the only exceptions were 2008, the year of the global financial crisis, and 2012, the year of a change in the Mainland Chinese government).”
Consequently, Citi analysts have raised thier price targets on a number of gaming companies, including Las Vegas Sands (NYSE: LVS), Wynn Resorts (NasdaqGS: WYNN), MGM Resorts (NYSE: MGM) and Melco Crown (NasdaqGS: MPEL).
Additionally, Macau is expected to see revenue growth as a strengthening global economy loosens up gamblers’ wallets. Meanwhile, competition remains relatively unchanged, with no major expected casino expansions.