Morgan Stanley: Macau's February gaming revenue exceeds expectations, urges to maintain selective preference for Galaxy Entertainment

JP Morgan's research report indicates that Macau's total gaming revenue (GGR) in February increased by 4% year-on-year to MOP 20.6 billion (the same below), with an average daily revenue of MOP 737 million, which is better than market expectations and the bank's forecast. More importantly, driven by strong end-demand from high-end customers, the average daily revenue in the last week of February reached about MOP 1 billion, compared to the relatively subdued performance during the Lunar New Year holiday. However, the bank believes that the subdued performance during the Lunar New Year is mainly due to timing factors, as this year's Spring Festival peak was later than in previous years, rather than weak potential demand.

After accounting for February's data, GGR for the first two months of this year has grown by 14% year-on-year, recovering to 86% of pre-pandemic levels, consistent with the strong growth momentum seen in the second half of last year. However, the bank believes that GGR performance in March will not catalyze industry stock prices, as investor focus has shifted to profit margins and EBITDA growth. Although the bank has indeed seen preliminary signs of quarter-on-quarter improvement, it still urges selective investment.

Within the industry, the bank is most optimistic about Galaxy Entertainment (00027.HK), with a target price of HKD 52; followed by Sands China (01928.HK) and MGM China (02282.HK), with target prices of HKD 22 and HKD 18, respectively. Wynn Macau (01128.HK) has a target price of HKD 8, and all of the above stocks are rated "Overweight." As for SJM Holdings and Melco International Development, they are rated "Underweight," with target prices of HKD 2 and HKD 3.5, respectively