Revised Growth Expectations
CLSA has adjusted its 2026 outlook for Macau’s gross gaming revenue (GGR), predicting an increase of only 2.3%, equivalent to MOP253.2 billion ($31.3 billion). This revision follows a 12% decline in June’s year-on-year performance, anticipated to extend into July. With this update, CLSA sits 3.5% below the Bloomberg consensus. Analysts Jeffrey Kiang and Evan Wan indicated potential downward revisions in market earnings forecasts. While consensus suggests a boost to daily GGR reaching MOP729 million ($90 million) in the latter half of the year, the first six months averaged MOP701 million ($87 million) per day.
Impact on Monthly and Quarterly Projections
According to CLSA’s updated projections, July’s GGR is expected to decline 12% year-on-year to MOP19.5 billion ($2.41 billion), and a 2% dip in the second half is predicted, with revenue forecasted at MOP126.3 billion ($15.6 billion). Forecasts for August through December remain stable, with an anticipated uptick in daily takings from mid-July. The second quarter experienced a slight 0.1% decrease year-on-year, totaling MOP61.0 billion ($7.55 billion), averaging MOP671 million ($83 million) daily. This reflects issues of lower-than-expected VIP win rates over seven of the nine weeks, similar to Citigroup’s earlier evaluation of the same period.
Visitor Trends and Gaming Dynamics
Visitor statistics revealed a 7% year-on-year increase in arrivals to 6.93 million in April and May, slightly surpassing 2019 levels. However, overnight stays decreased, accounting for 38-39% of visitors, compared to 41-44% the previous year. Despite fewer overnight stays, the average duration increased to 1.7 nights, and GGR per overnight visitor rose 7% to MOP15,836 ($1,960). However, overall GGR per visitor remained steady at MOP6,133 ($759), highlighting the resilience of the premium segment. Visitor growth trends have been subject to various external factors.
Stock Performance and Ratings Adjustments
Despite a less optimistic forecast for the gaming market, CLSA has upgraded Wynn Macau and Melco Resorts to Outperform from Hold due to valuation aspects, with five out of six license holders now rated Outperform. SJM Holdings remains Underperform. CLSA revised most share price targets downward to account for the weaker earnings outlook, with the exception of Galaxy Entertainment, which saw its target slightly increased. Despite challenges, the evaluated stocks remain relatively undervalued, with the combined market capitalization of the six operators at $42.8 billion, considered low historically.
Long-Term Positive Outlook for Galaxy Entertainment
Galaxy Entertainment continues to be CLSA’s preferred choice, supported by its strategy of leveraging entertainment events to drive casino traffic and its robust financial structure. Analysts believe Galaxy will enter a phase of increased free cashflow by 2026-2027, benefiting from its significant capital expenditure investments. The company is anticipated to outpace peers in terms of financial recovery and growth.
The overall picture for Macau remains challenging, yet some operators, bolstered by strategic moves and market positioning, may still find opportunities for growth amidst a fluctuating industry landscape.