Morgan Stanley sees more decline in Macau’s VIP

Analysts from Morgan Stanley said that VIP will continue its decline in Macau in 2019.

Macau.- Morgan Stanley analysts discussed the economic status of Macau and said that VIP results will continue their downward trend. The brokerage said that gaming stocks in Macau have underperformed by 5% due to underperformance to continued weakness in VIP and gaming gross revenue (GGR).

The analysts said that mass revenue growth remained robust in the first quarter and increased 10% year-on-year. “We expect it to improve to 12% year-on-year in the second quarter. We are raising our 2019 mass growth expectation from 7% to 10% but cut our VIP growth estimate from a decline of 6% to a decline of 14%.”

Morgan Stanley said that increased competition from ASEAN countries, as well as the newly enforces smoking ban and continued crackdown on illegal banking will continue to affect the VIP segment in 2019.

The VIP decrease drove the brokerage to adjust the estimates for GGR in 2019 from a 1% increase to a 1% decrease year-on-year. However, it estimates that EBITDA will rise 2% in 2019, Macau Business reported.

“SJM and Sands are seeing the biggest positive earnings revisions post a better 1Q19. We lower most of the price targets in our coverage universe to reflect lower GGR and lower multiples due to rising uncertainty,” Morgan Stanley analysts said.