Credit Suisse Sees Macau Recovery Drivers Intact

Credit Suisse's Kenneth Fong remained confident in a call to continue accumulating select names in the Macau gaming sector. The analyst published a research note Tuesday morning entitled "recovery drivers intact; accumulate."

"Rather than short-term datapoints, we suggest investors should focus on forward looking drivers which are pointing towards a recovery cycle," Fong said. Three main points highlighted by the Credit Suisse analyst:

• "Liquidity: strong China loan growth in 1Q will gradually filter into the VIP system over the next few quarters as in the past,
• Policies: both Central (encourages Pan Delta River integration) and local governments (affirmative tone in industry interim review) are supportive towards the sector, and
• Momentum: the YoY decline for GGR continues to narrow (from -25% in Dec 15 to only -9.5% in April 16)."

He offered five key themes to watch out for in Macau:

• VIP recovery;
• leverage as margin driver;
• non-gaming;
• weekly revenue; and,
• policies.

Out of the seven stocks covered in Credit Suisse's Macau universe, Fong maintained Outperform ratings on three, MGM China, Galaxy Entertainment and Wynn Macau. Fong said to accumulate these three names.

Melco Crown Entertainment Ltd (ADR) MPEL, SJM, Sands China and Melco International are viewed as Neutral recommendations.