Goldman Sachs: Macau's January gaming revenue exceeds expectations, expected to grow 17% year-on-year in the first quarter

Goldman Sachs research report indicates that Macau's total gaming revenue (GGR) in January exceeded market expectations, growing 24% year-on-year to MOP 22.6 billion, reaching 91% of the 2019 level, with growth accelerating further from 15% in the fourth quarter of last year. The average daily gaming revenue was MOP 730 million, compared to MOP 718 million in the fourth quarter of last year. The bank believes the strong performance can be attributed to healthy visitor numbers, with mainland tourist numbers increasing by 18% year-on-year.

The bank expects a strong performance during the Lunar New Year holiday, based on a low base last year, a longer holiday this year, and sustained strong domestic tourism demand. Assuming gaming revenue is 25% to 35% above trend levels, the estimated daily revenue could reach MOP 850 million to MOP 900 million.

Additionally, the bank does not believe the Winter Olympics will divert gaming demand. Even though the World Cup in June and July may have an impact, it is expected that the effect on revenue for that month will not exceed 5%. The bank still believes that gaming revenue will maintain healthy growth in the first half of this year, expecting year-on-year growth of 17% and 8% in the first and second quarters, respectively.

Regarding stocks, the bank noted that although Sands China (01928.HK) reported fourth-quarter EBITDA below expectations, raising market concerns about intensified competition, this was mainly due to one-time expenses related to the NBA and the National Games, as well as a shift in the gaming revenue mix towards the lower-margin VIP business. The bank still expects Galaxy Entertainment (00027.HK) and MGM China (02282.HK) to report solid performances in the fourth quarter, with EBITDA increasing by 28% and 8% quarter-on-quarter, respectively; reiterating a "Buy" rating on the aforementioned stocks