Macau:2Q wrap,Consensus for 2H17too conservative

类别:行业研究 机构:德意志银行 研究员:德意志银行研究所 日期:2017-10-12

GGR in 2H is usually 10% higher than in 1H。

    QTD, Macau stocks have underperformed MSCI HK by 10ppt as 2Q results mostlymissed expectations. Of the 5companies reported, only Wynn delivered both GGR& EBITDA qoq growth. On 30Aug, we think Galaxy will be the next one to deliverboth GGR & EBITDA qoq growth. Recently, local checks told us that more smalljunkets are expanding footprints (Fig 4). e.g. Galaxy Macau just opened a VIP roomfor David junket in August. Historically, 2H is the high season with GGR typically10% above that in 1H. But consensus seems to be too conservative, forecasting2H17EBITDA to be merely 1% above 1H17. We think Wynn and Galaxy have thestrongest consensus upgrade potential (Fig 20). Our 2H17F EBITDA for Wynn &Galaxy is 12% above consensus. Top pick Wynn.。

    2Q17wrap: Wynn the biggest beneficiary in this Macau recovery。

    Five of the 6Macau gaming operators had reported 2Q results. Key takeaways:

    (1) In the 2Q low season, Macau GGR slipped 1% qoq as VIP (roll +4% qoq)did not grow enough to offset the seasonal softness in mass (Mass GGR -4%qoq).

    (2) Cotai continued to gain share, esp in the mass market.

    (3) Competitionsremained largely disciplined - Promotional allowances (comps) rose from 10% ofMass GGR in 1H16to 11% in 2H16after Wynn & Sands openings, but remainedlargely flattish in 1H17. That said, Cotai casino comps are noticeably higher thanPeninsula (11% vs 9% of Mass GGR), which may become a problem when moreCotai casinos open. Thankfully, other cost items such as junket commissions andlabour costs had remained stable (Figure 24).。

    2H17outlook: GGR growth slows, but not as much as the market fears。

    Consensus is expecting a sharp slowdown in GGR momentum from 29% yoy inJuly to 12% yoy in Aug-Dec. While we agree that GGR growth will slow giventougher comps, we think it will only slow to 17% yoy in Aug-Dec. We're morebullish than the Street because we’ve learnt from junkets that China's Tier-3cities are minting new VIPs as the "Shanty Town Reimbursement Plan" has beenpropping up property prices in Tier-3cities. Recall that Macau's VIP GGR is mostlycorrelated to Tier-3city property prices (75% correlation Figure 6) , and not toTier-1city property prices (Figure 5).。

    Valuation now more reasonable after pullback; key risks。

    We value Macau stocks on SOTP with target multiples on 2017e EV/EBITDA.Downside risks: a sharp slowdown in GGR momentum, a change in investorpreference from momentum stocks to value stocks and regulatory changes.Upside risks: milder-than-expected tightening of China's macro credit policy.。

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