• 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
  • Features
  • Industry Talk
  • Trends & Tech
  • follow
    • Facebook
    • Twitter
    • RSS Feed
    • LinkedIn

Openings, cash flow put oomph in Macau: Morgan Stanley

Jan 05, 2015 Newsdesk Latest News, Macau, Top of the deck  


Openings, cash flow put oomph in Macau: Morgan Stanley

Macau casino company stocks are again turning attractive says a New Year outlook report issued on Monday by Morgan Stanley Research Asia Pacific.

Macau stocks underperformed Hong Kong’s benchmark Hang Seng Index by 41 percent in 2014, states the research house.

Nasdaq-listed Melco Crown Entertainment Ltd on Friday applied to have its dual Hong Kong listing removed from that city’s bourse. Last month, Melco Crown was dropped from the benchmark Nasdaq Q-50 Index due to its poor stock performance.

But Morgan Stanley’s latest report cites favourable factors for Macau gaming shares in 2015. They include a likely sequential improvement in gross gaming revenue (GGR) coming off a more moderate base than previously, and attractive free cash flow (FCF) yield; as well as the likely market boost from the opening this year of Galaxy Entertainment Group Ltd’s Galaxy Macau Phase 2 (pictured) and of Melco Crown Entertainment Ltd’s majority-owned Studio City.

Morgan Stanley thinks that mass revenue – which according last week to a Credit Suisse AG estimate took a hammering in December on the back of China’s continued anti-corruption campaign – is likely to be flat in 2015, with a 9 percent decline in the first half and 11 percent expansion in the second half.

The Morgan Stanley paper acknowledges that margin pressure linked to issues including rising labour costs and possibly even some labour-related delays could take some of the shine off the new Macau openings. But the research house still likes the free cash flow story from the local industry.

“Recurring industry FCF yield is [about] 8 percent (the highest globally); dividend yield is [about] 5 percent,” states the document ‘Asia Insight: 2015 – Change of Luck’ by Praveen Choudhary, managing director, and analysts Alex Poon and Thomas Allen.

They added: “…we expect sequential improvement in GGR, driven by a lower base and the opening of Galaxy Macau Phase 2, and Studio City to result in positive industry growth. Wynn [Macau Ltd] and SJM [Holdings Ltd] also plan to add 40 and 10 new tables, respectively, in 2015.”

The report says that cuts in dividends paid by casino names are possible. It cites its own research indicating the local sector’s net cash position is falling, and as of the end of the third quarter 2014 was around 40 percent down compared to end-2013.

But it adds that dividend yield – even based on consensus estimates for the industry – would for the first time lag total free cash flow yield, a figure that factors current capital expenditure on development.

“Price multiples have reached two-year lows and are one standard deviation below long-term averages based on consensus estimates,” adds the report in a commentary on the Macau-based stocks.

It adds: “While our earnings estimates remain below consensus, we see upside to valuations based on 8 percent FCF yield and 5 percent dividend yield.”

Morgan Stanley acknowledges that other lingering market risks include mainland China’s continued scrutiny of VIP gamblers’ agents and the junkets that facilitate VIP play in Macau casinos.


  • tweet
Related articles
  • Macau casino 4Q 2020 EBITDA up 140pct on 1Q: MS
    Macau casino 4Q 2020 EBITDA up 140pct...

    Jan 13, 2021  

  • Morgan Stanley dips Macau 2021 GGR outlook on weaker VIP
    Morgan Stanley dips Macau 2021 GGR...

    Jan 08, 2021  

More news
  • Casino op MGM China to pay most staff discretionary bonus
    Casino op MGM China to pay most staff...

    Jan 18, 2021  

  • Casino op Silver Heritage to issue 53mln new shares
    Casino op Silver Heritage to issue...

    Jan 18, 2021  


Latest News

Casino op MGM China to pay most staff discretionary bonus

Casino op MGM China to pay most staff discretionary bonus

Jan 18, 2021  

Macau casino operator MGM China Holdings Ltd announced on Monday that it was to pay a “discretionary bonus” to “eligible non-management” staff, adding that “over 90 percent” of its...
Read More
Casino op Silver Heritage to issue 53mln new shares

Casino op Silver Heritage to issue 53mln new shares

Jan 18, 2021  

Grand Korea extends Seoul, Busan casino closures to Feb 1

Grand Korea extends Seoul, Busan casino closures to Feb 1

Jan 18, 2021  

Sign up to our FREE Newsletter

UB8V5.qr.16(Click here for more)

Partners

Pick of the Day

"The most worrying [thing] is whether [mainland] China will again tighten the issuance of travel visas [for visits to Macau]"

Luiz Lam Kai Kuong

Macau junket investor



Most Popular

  • CNY 2021 unlikely to boost Macau casinos, say observersCNY 2021 unlikely to boost Macau casinos, say observers January 15, 2021
  • Police find US$11m of missed Landing cash, suspects soughtPolice find US$11m of missed Landing cash, suspects sought January 14, 2021
  • Still Asia focus for LVS post chairman death: BernsteinStill Asia focus for LVS post chairman death: Bernstein January 14, 2021
  • Quality fake chips sold online found at Macau casinoQuality fake chips sold online found at Macau casino January 13, 2021
  • Melco Resorts debt/EBITDA ratio to worsen in 2021: Moody’sMelco Resorts debt/EBITDA ratio to worsen in 2021: Moody’s January 14, 2021
Copyright 2014-2020 TEAM Publishing and Consultancy Ltd / All rights reserved
  • Code of Ethics
  • Privacy Policy
  • Useful Links
  • Contact Us