• About Us
  • The Team
  • Advertise with Us

The latest news on the gaming industry in Asia

() () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () () ()
  • Home
  • Macau
  • Philippines
  • Singapore
  • Japan
  • Rest of Asia
  • World
  • Industry Talk
  • Trends & Tech
  • iGaming
  • follow
    • Facebook
    • Twitter
    • RSS Feed
    • LinkedIn

Macau stabilising, stocks not attractive after rally: MS

Mar 21, 2016 Newsdesk Latest News, Macau, Top of the deck  


Macau stabilising, stocks not attractive after rally: MS

The rally in stock prices of Macau-related gaming operators since their January bottom was “justified” as “fundamentals are stabilising”, says a new report from Morgan Stanley. But after an average share price rebound of over 40 percent, “valuation is not compelling any more,” the investment bank adds.

“Macau’s daily gross gaming revenue (GGR) has been tracking around MOP600 million (US$75 million) for the last six months; minimum bets are not declining; VIP revenue showed its first quarterly growth since 2013 in the fourth quarter of 2015 sequentially; and EBITDA [earnings before interest, taxation, depreciation and amortisation] margin has improved thanks to better mix and cost-cutting,” analysts Praveen K. Choudhary, Alex Poon and Thomas Allen wrote on Monday.

“But without growth or dividends in the near term, the industry may not re-rate further: for growth, the industry needs growth in either visitation or spending per capita,” they added.

The annual tally of visitors to Macau fell 2.6 percent year-on-year in 2015, according to official data. For full-year 2015, visitor arrivals totalled 30.71 million, down by around 811,000 year-on-year.

February’s casino GGR was 0.1 percent down from the same month a year earlier. It was the best monthly performance, in terms of year-on-year decline rate, in the last 21 months.

Morgan Stanley stated that the while the recent rebound in stock prices of Macau-related gaming operators was justified, “valuation is not compelling after a 40 percent rebound from January’s trough.”

The investment bank team added: “We think stock prices are reflecting too much optimism from the Chinese government’s supportive policy, which may or may not help fundamentals meaningfully.”

China’s central government has pledged to introduce measures to help Macau’s economy to rebound, after gross domestic product contracted by 20 percent in 2015, mainly due to the ongoing slump in the city’s gaming industry. Beijing has yet to unveil concrete measures, although it recently mentioned a potential “optimisation” of the individual visa scheme to Macau.

Morgan Stanley’s note added that some potential risks facing the industry “include rise in competition from overcapacity and thus margin decline, limited cost-cutting potential in 2016, and potential smoking ban in VIP rooms.”

Macau legislators approved in July last year the first reading of a government bill that proposes the abolition of casino smoking lounges and a full smoking ban in VIP areas. The bill is now at committee stage in the Legislative Assembly.

There has been ongoing discussion among observers of the Macau gaming industry on the topic of market stabilisation. In a March 9 note, Wells Fargo Securities LLC stated it was  probably “too early to call stabilisation” in the market. But several senior executives of Macau casino firms have recently highlighted signs of what they regard as stabilisation in the market.

In its Monday note, Morgan Stanley maintained its estimate of a 6 percent year-on-year decline in overall Macau GGR in full year 2016. That decrease will be a result of a decline of 16 percent in VIP revenue, partially compensated by an increase of 4 percent in the mass-market segment, it stated.

Macquarie raises sector

On Thursday, Macquarie Capital Ltd – regarded by some industry observers as conservatively cautious in its analysis of Macau gaming – raised its outlook on the city’s casino industry.

It upgraded its full year 2016 GGR forecast for Macau to a decline of 6 percent in year-on-year terms. Its prior estimate pointed to a full year decline of 13 percent.

“We expect Macau GGR will enter a third year of decline (-6 percent) in calendar year 2016 (estimate) and flat growth in calendar year 2017 (estimate)  before a low-single-digit L-shaped recovery in calendar year 2018 (estimate),” analysts Kai Tan, Maggie Jiang and Jensen Hui wrote.

They added: “We raise our Macau gaming sector view from underweight to neutral and suggest investors selectively accumulate shares in April 2016 post the March 2016 GGR release.”

According to media reports, Mcquarie’s Thursday note was one of the reasons leading to a surge in share price of Macau-related gaming operators on Friday in Hong Kong trading. MGM China Holdings Ltd led the gains, with its stocks increasing almost 14 percent, while other operators recorded share gains of between 5 percent and 10 percent.

In its Thursday note, Macquarie had also increased price targets for the six Macau gaming operators.

“We believe Sands China Ltd and Galaxy Entertainment Group Ltd, with well established properties in Cotai, will be the biggest beneficiaries of the [Cotai] project delays announced so far by Wynn Macau Ltd and MGM China,” the brokerage added.


  • tweet
Related articles
  • 36 Macau Covid cases, June GGR forecast 9pct of June 2019
    36 Macau Covid cases, June GGR forecast...

    Jun 20, 2022  

  • Wynn Macau Ltd parent loan not best sign for sector: MS
    Wynn Macau Ltd parent loan not best...

    Jun 15, 2022  

More news
  • Only 2 Macau satellites closed as concessions extended
    Only 2 Macau satellites closed as...

    Jun 29, 2022  

  • LVS full recovery may take until 2024: Moody’s
    LVS full recovery may take until 2024:...

    Jun 29, 2022  


Latest News

Only 2 Macau satellites closed as concessions extended

Only 2 Macau satellites closed as concessions extended

Jun 29, 2022  

Only two of Macau’s 18 satellite casinos – the Rio Casino and the President Casino – have closed amid changes to the city’s regulatory system for such properties, and against...
Read More
LVS full recovery may take until 2024: Moody’s

LVS full recovery may take until 2024: Moody’s

Jun 29, 2022  

Satellite casino ops still to Dec 31 at Casa Real, Grandview

Satellite casino ops still to Dec 31 at Casa Real,

Jun 29, 2022  

Sign up to our FREE Newsletter

UB8V5.qr.16(Click here for more)

Pick of the Day

"There is still no clarity about when border easing for Macau will occur. In the end these changes are needed to see a rebound for Macau business"

Vitaly Umansky, Louis Li and Shirley Yang

Analysts at brokerage Sanford C. Bernstein



Most Popular

  • Macau casino Covid tests from Fri, ops pay for staff testsMacau casino Covid tests from Fri, ops pay for staff tests June 28, 2022
  • China quarantine easing good signal for Macau: analystsChina quarantine easing good signal for Macau: analysts June 29, 2022
  • SJM to make 2nd of pledged staff subsidy payments for 2022SJM to make 2nd of pledged staff subsidy payments for 2022 June 27, 2022
  • Moody’s confirms SJM Holdings’ ratings, negative outlookMoody’s confirms SJM Holdings’ ratings, negative… June 27, 2022
  • LVS full recovery may take until 2024: Moody’sLVS full recovery may take until 2024: Moody’s June 29, 2022
Copyright 2014-2022 TEAM Publishing and Consultancy Ltd / All rights reserved
  • Code of Ethics
  • Privacy Policy
  • Useful Links
  • Contact Us