20140806-美银美林-July_GGR_breakdown_Mass_growth_slowed_to_+17__YoY_11页_668kb

July GGR Breakdown Summary

Core Content

The report provides an analysis of the Macau gaming sector's performance in July 2014, highlighting a slowdown in both mass and VIP gaming gross gaming revenue (GGR) compared to previous months. The report also includes forecasts for the second half of the year and valuation multiples for key operators in the gaming industry.

Main Points

• July GGR Performance:

  • Overall GGR for July was down by 3.6% YoY to MOP28.4bn, with a daily run-rate of 917mn.
  • Mass GGR growth slowed to +17% YoY (vs. +27% YoY in June).
  • VIP rolling declined by -14% YoY (vs. -10% YoY in June).
  • VIP win rate improved to 3.19% from 2.95% in June, slightly below the July 2013 level of 3.20%.
  • On a luck-adjusted basis, July revenue was down by 3% YoY.

• YTD Performance:

  • VIP and mass GGR were up by 1% and 33% respectively, compared to the full-year forecast of 4% and 28%.

• Analyst Forecasts:

  • The bottom-up forecast is already lower than the top-down forecast due to revised estimates for Sands, Wynn, and MGM.
  • Analysts have issued Buy ratings for several companies, including Galaxy, Sands China, Wynn, Melco Crown, and MGM China, with price objectives based on EV/EBITDA multiples ranging from 11x to 16x.

Key Information

Market Share Breakdown in July

• SJM led with 24.1% market share (-80bps MoM).
• Sands had 23.1% market share (+110bps MoM).
• Galaxy had 20.6% market share (-50bps MoM).
• MPEL had 12.3% market share (+10bps MoM).
• Wynn had 11.1% market share (+160bps MoM).
• MGM had 8.8% market share (-150bps MoM).

2Q Results Overview

• Sands and Wynn both missed estimates by 8% and 12%, respectively, due to weaker margins and unfavorable hold rates.
• MGM results were largely in-line with expectations.
• MPEL is expected to report results and have adj. EBITDA of US$308mn (-7% YoY).
• SJM is expected to report on August 13 with adj. EBITDA of HK$2,099mn (-1.9% YoY).
• Galaxy is expected to report in about 2 weeks with adj. EBITDA of HK$3,424mn (+13% YoY).

GGR Growth Outlook

• Despite the July slowdown, a recovery in GGR growth is expected in 2H due to a better macro outlook.
• The Macau gaming sector is currently trading at an average of 10.9x 2014E EV/EBITDA (including Cotai potential) or 15.2x (excluding Cotai potential).

Valuation Multiples and Price Objectives

Company	Price Objective	Target EV/EBITDA	2014E EV/EBITDA	Upside/Downside
Galaxy Entertainment	HK$82.9	15x 2015E	12.0x	31%
Melco Crown	US$48.5/HK$126.1	15x 2014E	11.9x	52%
MGM China	HK$38.9	13x 2015E	8.4x	41%
Sands China	HK$67.70	16x 2015E	14.5x	22%
SJM Holdings	HK$25.5	11x 2015E	8.7x	25%
Wynn Macau	HK$41.3	14x 2015E	10.1x	30%

Key Risks

• Policy risks: Travel restrictions, flu outbreaks, and reliance on junkets.
• Competition: Intensifying from Macau and other regions in Asia.
• Revenue slowdown: Potential due to tightening liquidity in mainland China.
• Operational risks: Budget overruns, succession issues, and cannibalization from third-party casinos.

Additional Notes

• The report includes charts and graphs illustrating trends in VIP win rate, mass and VIP revenue, and market share.
• Definitions of commonly used terms are available for reference.
• The report contains important disclosures regarding conflicts of interest, analyst certification, and investment rating guidelines.
• Analyst Certification confirms that the views expressed are based on personal analysis and not influenced by compensation.
• Investment Rating Distribution shows a Buy rating for 63.16% of the coverage universe, Neutral for 21.05%, and Sell for 15.79%.

Conclusion

The Macau gaming sector experienced a slowdown in July, with mass GGR at +17% YoY and VIP rolling at -14% YoY. Despite this, a recovery in GGR growth is anticipated in the second half of the year. Analysts have issued Buy ratings for most key operators, with price objectives based on EV/EBITDA multiples and dividend expectations. The report highlights various risks and opportunities for investors in the sector.