While Macau’s casinos benefited from strong visitation during Golden Week, Morgan Stanley analysts warn that weak third-quarter earnings and cuts in 2019 estimates may drive stocks down.
According to the brokerage, Macau saw an increase in Golden Week visitation from China during the first six days - up 19 percent year-on-year, with VIP volume was up 10 percent year-on-year.
However, with visitation somewhat flat during the last two days - and combined with disappointing 18Q3 EBITDA, the analysts said they see consensus earning revisions being down over the next few months.
“Macau in a slowing growth environment tends to underperform, and we do not expect the stocks to trade above long-term averages,” said the brokerage.
In the near term, MS said it prefers Sands China due to its mass exposure, high dividend payout and yield, along with a strong 18Q3 outlook, as well as MGM China - which it says is cheap, Cotai not priced in, and has seen positive Q3 growth.
In regards to 18Q3 earnings, Morgan Stanley said it expects industry GGR to be up 10 percent year-on-year, while property EBITDA will be up 7 percent year-on-year.
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