Goldman Sachs Previews Q3 Earnings For Macau Gaming

Despite volatility, the Macau gaming sector is expected to report strong GGR momentum for Q3, with industry EBITDA growth of 3 percent year-over-year.

Goldman Sachs’ Simon Cheung maintained the GGR and EBITDA growth estimates for 2017 at 7 percent and 12 percent, respectively.

Despite weekly volatility, GGR in September was better than expected, with the Wynn Palace and Parisian casino openings believed to have stimulated demand, Cheung mentioned. He added that the daily run rate had improved from MOP608 million in August to MOP613 million last month, even though September is a seasonally weaker month.

“Besides bigger VIP players coming back for the novelty effect, we noticed busier mass gaming floors across the key properties in recent weeks,” Cheung wrote.

Related Link: Macau September Revenue Tops Expectations: Is The Bottom Finally In?

October Performance

There have been concerns around a 15 percent year-over-year decline in visitation from PRC in the first two days of October. The analyst pointed out, however, that this decline is off a high base last year, with the mid-autumn festival falling close to the Golden Week. He further stated, “Indeed, the latest data showed visitation +10% yoy on Oct 3, consistent with historical trend of a peak on the 3rd-4th day of the holiday.”

Q3 Performance

Cheung noted that sector valuation appears full, and investors are likely to focus on GGR data and Q3 results for earnings revisions. Since a turnaround in industry GGR is anticipated from a year-over-year decline of 9 percent in Q2 to 1 percent year-over-year growth in Q3, industry EBITDA growth is estimated at 3 percent year-over-year.

Performance Of Companies

The analyst expects Wynn Resorts, Limited WYNN and MGM Resorts International MGM to each gain 4 percent EBITDA share in 2016-2018, at the cost of Galaxy Entertainment Group Ltd GXYEY [expected decline of 4 percent], Melco Crown Entertainment Ltd (ADR) MPEL [expected decline of 2 percent] and Las Vegas Sands Corp. LVS [expected decline of 3 percent].

Price Target Changes For Macau Gaming Operators

• Wynn Macau: Buy rating maintained, with price target reduced from HKD15.40 to HKD15.00
• MGM China: Buy rating maintained, with price target raised from HKD13.70 to HKD15.70
• Galaxy: Neutral rating maintained, with price target raised from HKD30.90 to HKD32.90
• Melco Crown: Neutral rating maintained, with price target raised from HKD16.60 to HKD17.10
• Sands China: Neutral rating maintained, with price target raised from HKD27.10 to HKD30.60

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