德银-澳门-酒店、休闲与博彩业-强劲的中国游客预示着良好的大众化GGR增长预期-20180220-17页_1mb

Macau Industry Update: CNY Performance and Valuation (20 February 2018)

Core Content

This report provides an update on the performance of the Macau gaming, hotel, and leisure industry during the Chinese New Year (CNY) period and evaluates the current valuation of key companies in the sector.

Key Highlights

• CNY Visitor Growth:

  • Total visitation in Macau increased by 9.3% year-over-year (yoy) over the first four days of CNY (16-19 Feb 2018), surpassing the Tourism Office's forecast of 2-3% yoy.
  • Chinese visitors saw a 16.9% yoy increase, making up 74% of total visitors, which supports the thesis of mass GGR growth acceleration in 2018.
  • The increase in visitor numbers was not fully translated into GGR due to the absence of Super VIPs during the holiday, as they preferred to travel overseas and return to Macau for large Spring Dinners in March.

• MGM Cotai Performance:

  • MGM Cotai, which opened just before the CNY period, attracted more foot traffic than MGM Peninsula, indicating a strong start.
  • On CNY Day 3, MGM Cotai received ~40,000 visitations, surpassing MGM Peninsula's numbers in previous years.
  • Currently, MGM Cotai has ~165 mass gaming tables and VIP rooms are expected to open in summer, which will likely boost its GGR.
  • The property's high-end offerings (e.g., VIP entrance, quick elevator access, VIP villas) are highly regarded.
  • The report suggests that if MGM China's share price dips due to slow ramp-up, investors should consider buying on dips.

• Hotel Booking Trends:

  • The busiest days for hotel bookings were CNY Day 3 and 4 (18-19 Feb 2018).
  • MGM and Wynn hotels were nearly fully booked throughout the CNY holiday.
  • Over 50% of rooms in 20 surveyed hotels were fully booked between 17 Feb and 21 Feb, showing strong demand.
  • ADR (Average Daily Rate) increased for 12 of 20 hotels, with Cotai hotels seeing more growth.
  • Sands China's hotels, except for Sands Macau, all showed higher ADRs compared to last year.

• Valuation and Investment Outlook:

  • Macau shares are currently trading at 14.6x DB 2018E EV/EBITDA, slightly above +1 std deviation (14.3x), suggesting an attractive risk-reward profile.
  • The report recommends buying Sands China, MGM China, and Wynn Macau due to their strong fundamentals and potential for growth.
  • Wynn Macau is highlighted for its strong FCF (Free Cash Flow) and potential re-rating following a special dividend in March.
  • Key risks include a sharp decline in VIP GGR and policy changes.

Companies Featured

Valuation Table (2018E)

Figures and Data

• Figure 1: Visitor arrivals to Macau over CNY Day 1-4 show a 9.3% yoy increase to 597,436 total arrivals, with 445,041 from Mainland China.
• Figure 2: Chinese arrivals increased 17% yoy on Day 1 of CNY, with a 74% share of total visitors by Day 4.
• Figure 3: Hotel room survey data indicates fully booked rooms for most properties, with Cotai hotels seeing higher occupancy and ADR.
• Figure 4: 5-star hotel ADR increased 6% yoy in December 2017.
• Figure 5: 5-star hotel RevPAR (Revenue Per Available Room) showed clear growth in the second half of 2017.
• Figure 6: 5-star hotel occupancy reached 95% in December 2017.
• Figure 7: Overnight visitor growth in 2017 was driven by Chinese visitors.
• Figure 8: Macau sector valuation at 14.6x EV/EBITDA is considered reasonable for an upcycle, with potential to reach 16x EV/EBITDA.
• Figure 9: Absolute share price performances show mixed results, with some companies outperforming the market.

Important Disclosures

• Deutsche Bank and its affiliates may have managed or co-managed public or private offerings for the companies mentioned.
• Deutsche Bank may make a market in equity securities issued by these companies.
• The report includes conflict of interest disclosures for securities other than the primary subject.
• Investors are encouraged to review disclosures before making investment decisions.

Analyst Certification

• The views expressed in the report reflect the personal views of Karen Tang, the lead analyst.
• The analyst did not receive compensation for the specific recommendations or views in this report.