GGRAsia – Likely 50pct rebound in Macau stocks on past form: MS

Likely 50pct rebound in Macau stocks on past form: MS

Sep 14, 2018 Newsdesk Latest News, Macau, Top of the deck

The current circa 30-percent downward correction in Macau casino company share prices is likely to be followed by a circa 50 percent rebound, if markets behave in a similar way to previous corrections, said a Thursday note from Morgan Stanley Asia Ltd.

“The current slowdown feels like 2011-2012, when VIP revenue growth contracted from 65 percent [expansion] to -8 percent while mass remained resilient,” stated analysts Praveen Choudhary and Jeremy An, referring latterly to mass-market, main-floor gambling in Macau’s casinos.

They added: “If, as we expect, the current cycle repeats the pattern seen between January and April 2012, investors are set for a 50 percent rebound.”

The Hong Kong-listed stocks of Macau casino operators took a hammering on Tuesday, coinciding with a note that day from Deutsche Bank AG out of Hong Kong, cutting the 2019 gross gaming revenue (GGR) year-on-year growth outlook for Macau from 11 percent to 4 percent, and suggesting Macau was at the start of a cycle marking a downward revision of GGR and earnings.

Japanese brokerage Nomura noted in a Monday report that since early June Macau gaming stock prices had shrunk by between 20 percent and 30 percent, “with much of the decline over the last five trading days”.

“We believe the decline to be somewhat justified given fears over an extended and more damaging trade conflict, but also believe it’s overdone,” said Nomura analysts Harry Curtis, Daniel Adam and Brian Dobson.

In a Tuesday note, Morgan Stanley had said Macau casino hotel bookings were fully booked for at least four nights of the upcoming October Golden Week holiday. The festive periodencompasses China’s National Day celebrations on October 1 and is a typically strong period for Macau casino takings.