20170508-招商证券_香港_-Macau_Gaming_System_upgrade_on_ATMs._Time_to_switch_to_mass_22页_696kb_696kb

Macau Gaming Sector Analysis Summary

Core Content Overview

This report provides an analysis of the Macau gaming sector, focusing on the shift from VIP to mass market segments, the impact of regulatory changes, and the performance of key players. It outlines investment recommendations and financial insights based on current market conditions and future expectations.

Main Points

System Upgrade on ATMs

• Macau is introducing face recognition ATMs for Unionpay debit card users.
• This upgrade is part of tighter control over ATM withdrawals and is likely to lead to profit-taking in VIP-focused stocks.
• The policy change is expected to affect non-Unionpay users less, but may create a short-term profit-taking opportunity for VIP-focused operators.

Sector Performance and Earnings

• Macau's gaming sector showed strong performance in 1Q17, with 13% YoY growth in GGR.
• Four companies beat earnings expectations, two were in line, while SJM and MGM China faced challenges due to market share loss to Cotai properties.
• The sector is currently trading at 23x FY17E P/E and 14x EV/EBITDA, in line with five-year historical averages.

Investment Recommendations

• Top Picks: Melco Resorts (MLCO US), Sands China (1928 HK), Wynn Macau (1128 HK), and Galaxy (27 HK).
• Recommendation: Investors should start shifting from VIP-focused stocks to mass-driven names, as the latter is expected to outperform in the summer peak season.
• Neutral Ratings: MGM China (2282 HK) and SJM (880 HK) due to market share loss and re-rating potential from Cotai openings.

VIP Segment Analysis

• VIP gaming remains strong but is now more solid than before due to a shift in the client base to low-end VIP gamblers and new players.
• The recovery of VIP is seen as a consensus, and any negatives may be used as profit-taking opportunities.
• VIP is still subject to short-term volatility from policy changes and economic sentiment.

Mass Market Growth Drivers

• Tourism Recovery: Increased foot traffic from mainland China, driven by improved accessibility via high-speed rail and the opening of new attractions.
• Non-IVS Visitors: Growth in non-IVS (package tourists) is expected to continue, especially from non-Guangdong regions.
• New Amenities: Projects like Galaxy Macau 2, Studio City, Wynn Palace, and Parisian are attracting more casual gamblers and family-oriented travelers.

Grind Mass Outlook

• The shift from quality to quantity in mass GGR growth is expected to continue, with grind mass likely to grow faster than VIP.
• Parisian's full capacity operation in summer is expected to drive mass traffic to Cotai.
• The mass segment is now the key driver of sector growth, with potential for earnings upgrades.

Key Financial Insights

Conclusion

• The Macau gaming sector is transitioning from VIP to mass market as the primary growth driver.
• Policy risks, such as the ATM upgrade, may lead to profit-taking in VIP-focused stocks.
• The mass market is expected to outperform, especially during the summer peak season.
• Investors are advised to accumulate mass-focused stocks during price dips, with Melco Resorts and Sands China as top picks.