Macau GGR to drop 2 pct, Morgan Stanley says

According to investment bank Morgan Stanley, overall GGR in Macau casinos will decrease by 2% during 2019.

Macau.- A week into 2019, forecasts on how companies will perform begin to swarm the internet as brokerages publish their first reports of the year. That’s why investment bank Morgan Stanley has revealed that it expects Macau casinos to post an overall gross gaming revenue 2% smaller year-on-year.

According to a note signed by analysts Praveen Choudhary, Jeremy An and Thomas Allen, “the negative revisions mean more downside to stocks despite cheap valuations.” Analysts also explained that MGM China Holdings Ltd and Melco Resorts and Entertainment Ltd are the gaming shares to keep an eye on.

“While Macau is a structural growth story driven by low penetration and improving infrastructure, we see the cyclical slowdown continuing in 2019,” the note adds. “We change our industry view to ‘in-line’ from ‘attractive’ due to tightened liquidity, the full smoking ban pressuring VIP and premium mass growth in 2019, and potential decline in earnings before interest, tax, depreciation and amortisation year-on-year growth in the first quarter of 2019,” they considered.

“We now expect 2019 GGR growth of minus 2%, driven by negative VIP growth of minus 6% and slower mass growth of 2%,” the investment bank analysts said and added: “Licence renewal remains a key overhang, and could keep valuation multiples lower than long-term averages.”

As for the first quarter, Morgan Stanley expects a potential “negative EBITDA growth year on year due to high base, higher opex and a smoking ban on premium mass and VIP areas.”