Growth in Macau revenues delayed to 15Q2: Morgan Stanley

Monday 16th of March 2015

Macau’s gaming sector remains uninspiring in the short-term for analysts at Morgan Stanley Research with sequential growth in mass and gross gaming revenues expected to be delayed.

The revision to January estimates that potential sequential growth was to occur in the first quarter this year follows weak VIP revenues in during Chinese New Year, analysts Praveen Choudhary and Alex Poon wrote in a note.

“Sequential growth in mass and GGR has been delayed to 2Q15. Earnings estimate revisions remain negative and valuation is not compelling.”

“Sequential improvement delayed: Our January report, Change of Luck, highlighted potential sequential growth in 1Q15 and onwards to drive 2015 group outperformance. However, very weak VIP during CNY, driven by the continued anti-corruption campaign and tighter junket liquidity, pushed our sequential growth expectation to 2Q/3Q.”

Putting pressure on the industry will be table allocation and further regulatory risk, making the near-term outlook “murky.”

The analysts downgraded Wynn from equal weight to underweight; MGM from overweight to equal weight, and Melco Crown from overweight to equal weight,

“We cite high exposure to VIP, being late to open Cotai project, and high valuation. We see Galaxy benefiting from retail rental, and Sands China from its exposure to grind mass

and sustainable dividend.”