Galaxy Entertainment Group and Wynn are likely to have gained Macau market share in 2Q17, but another seasonally quiet quarter for Macau’s stocks will be felt most by MGM China, Melco Resorts and SJM according to Morgan Stanley.
In its latest report on Macau gaming, the financial services firm says it expects 2Q17 company EBITDA for Macau’s operators across the board to fall by 4% quarter-on-quarter despite revenue growth of 33% year-on-year.
That leaves only Galaxy and Wynn to show positive sequential EBITDA growth of roughly 1 to 2% each, with MGM, Melco and SJM to see declines of 15%, 5% and 4%, respectively.
Galaxy’s Company EBITDA is tipped to rise +2% quarter-on-quarter to HK$3.2 billion with market share gains in both VIP and mass in 2Q17.
“StarWorld may have lost market share in VIP due to closure of junket VIP rooms, but this should be more than offset by robust mass business,” said analysts Praveen Choudhary, Alex Poon and Thomas Allen.
Wynn’s Property EBITDA is expected to rise +1% to US$296 million with EBITDA growth to be driven mainly by Wynn Palace at +7% quarter-on-quarter to US$120 million with growth across all segments.
Morgan Stanley sees MGM suffering from a “high single digit decline in GGR and US$3 million of luck normalization” while both SJM and Melco are expected to have lost mass market share.
Sands can also expect EBITDA decline of 4% due to luck normalization of US$27 million and the departure of a junket at the Parisian in April. However, “Mass market share could be stable quarter-on-quarter, while Parisian should have seen improvement in both mass and VIP.”
The report does paint a brighter picture for all Macau stocks in the second half of the year, tipping them to outperform the Hang Seng Index with “strong seasonality in 3Q and 4Q driving positive earnings revisions.”
Once again it is Galaxy and Wynn leading the way with EBITDA estimates for Galaxy at 11% above consensus for 2017 and 15% above for 2018 while Wynn is at 6% above for both 2017 and 2018.
Morgan Stanley has also lifted its 2017 GGR industry estimate from 12% to 15%.
“We keep our 2018 GGR growth forecast unchanged at 9%,” it said. “This drives industry EBITDA up by 3 to 4% over 2017-19, implying annual growth of 23% in 2017 and 10% in 2018 and 2019. We raise our price targets by 3-7% for the companies (excluding Melco), reflecting higher GGR and EBITDA estimates. Our EBITDA estimates are above consensus for Galaxy and Wynn Macau.”
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