Gaming insights Gaming

Morgan Stanley raises 2017 Macau expectations

Written by Ben Blaschke

Macau can look forward to gross gaming revenue growth of around 10 percent in 2017 – its first positive year-on-year result in four years.

That’s the prediction of Morgan Stanley analysts Praveen Choudhary and Alex Poon, who have raised their expectations for the year ahead from an earlier estimate of around two percent growth and have labelled Wynn Macau and Galaxy as the two operators to watch.

In a report released this week titled Growth is Back in 2017; Seeking Better Entry Point for the Industry and Selective on Stocks, Morgan Stanley said, “We raise Macau GGR growth in 2017 to +10 percent from +2 percent.

“Cyclical upturn may continue until March 2017, but we keep an In-Line view due to regulatory risk and rich valuation. We remain selective and prefer Wynn Macau and Galaxy in 2017. Conclusion – we believe the Macau cycle has turned.”

Morgan Stanley nominated Wynn Macau as their number one stock pick for 2017, the company expected to continue to benefit from Macau’s stronger than anticipated finish to 2016.

“Macau stocks have outperformed Hang Seng Index by 28 percent YTD (Year to Date), but most of the outperformance came from July onwards (or 2H16),” the report said.

“EBITDA growth of 19 percent half-on-half was the key reason for the outperformance. The growth mainly came from improved VIP business, better luck, improved profitability at the new openings of Parisian and Wynn Palace in 3Q16, and continued ramp up at Studio City

and Galaxy Macau Phase 2, which opened in 2015.

“Casino hotel rooms grew 23 percent and drove Chinese overnight visitor growth to 10 percent year-on-year to October and helping the mix versus same-day visitors.”