Macau's gross gaming revenue predicted to jump 18.2% to MOP30.9b

Here's why analyst is very optimistic.

According to Maybank Kim Eng, it expects Macau’s gross gaming revenue (GGR) to top MOP30.9b in August, up 18.2% YoY and 4.8% MoM. Despite signs of a slowdown in the average daily run rates in the past seven days, Maybank believes the daily run rates of USD1b for the month would remain the second-highest for the year.

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In other words, we may be looking at the second-highest GGR figure ever to be recorded in Macau’s gaming history. We remain Overweight on Macau’s gaming sector, not least because it has outperformed the HSI and MSCI China by 9% and 7% in the last month.

The sector trades at 13x forward EV/EBITDA at +1SD of its two-year historical range. Our favourite stocks in order of preference are: Melco International (200 HK, BUY, TP HKD20.60), Sands China (1928 HK, BUY, TP HKD46.00) and SJM (880 HK Buy TP HKD23.80). 

Galaxy and SJM losing market share. Given the volatility in the market, we estimate Galaxy and SJM saw the biggest market share loss in August vis-à-vis their peers, shedding 2.7ppts and 1.1ppts.

This obviously would benefit Melco and MGM, whose market share might have risen by 1.7ppts each by our estimates. But we do not want to read too much into such market share volatility, as it could be just a case of normalisation in win rates this month.

However, if SJM continues to lose market share, it may have to cede its GGR market share leadership to Sands sooner than we expect. Visitor traffic flourishing. Total visitor arrivals in Macau continued to grow from strength to strength, climbing 4.9% YoY to 2.6m in July.

Mainland Chinese tourists accounted for the bulk of the arrivals, up a strong 14% YoY to 1.7m, of which 44% were under the individual visit scheme (IVS). We believe the improving connectivity and accessibility of Macau to China via the high-speed rail will continue to drive up penetration rates.

Improvements at checkpoints have  also begun to take effect, freeing up pent-up check point bottlenecks.