德银-澳门-酒店、休闲与博彩业-澳门2018展望：大众化加速，Sands评级提升为买入-20180115-52页_8mb

Macau: 2018 Outlook - Mass Accelerating; Upgrade Sands to Buy

Core Content

This document provides an analysis of the Macau gaming and hospitality industry for 2018, focusing on the performance of key players and market trends. It highlights the shift in growth dynamics between VIP (high rollers) and mass (general) segments, with a particular emphasis on the potential for mass market expansion. The report also includes investment recommendations and valuation insights.

Main Points

• 2017 Review:

  • VIP GGR (Gross Gaming Revenue) sharply outperformed mass GGR, growing at 24% yoy compared to 13% yoy.
  • The overall GGR for Macau rose by 19% yoy to US$33bn.
  • VIP-focused stocks like Wynn Macau and Galaxy outperformed mass-focused stocks like Sands China and SJM.

• 2018 Outlook:

  • The report forecasts that VIP GGR will grow at 20% yoy, while mass GGR is expected to accelerate to 15% yoy.
  • Total GGR for 2018 is expected to grow by 17% yoy, slightly above the Street consensus of 12–14%.
  • The opening of the HK-Zhuhai-Macau Bridge in June 2018 is anticipated to boost visitor numbers and mass GGR growth.

• Segment Dynamics:

  • VIP growth is expected to slow, but remain strong due to improved liquidity and continued demand.
  • Mass growth is expected to increase, driven by higher visitor numbers and rising average minimum bets.
  • The report notes that mass GGR growth is likely to outpace VIP growth in the second half of 2018.

• Company Performance:

  • Wynn Macau: Maintained as the top pick (Buy), with potential for re-rating following a special dividend in March.
  • MGM China: Recommended to buy on dips, especially if Cotai opening disappoints.
  • Sands China: Upgraded from Hold to Buy due to its strong position in the mass market and margin expansion potential.
  • Galaxy: Also upgraded to Buy, as a solid operator in a growing market.
  • SJM: Maintained as Hold, with Cotai opening likely delayed into 2019.

• Valuation:

  • Macau stocks are trading at 14.0x DBe 12m fwd EV/EBITDA, slightly below the +1 std deviation.
  • The report suggests that valuations are reasonable for an upcycle, with potential for stocks to trade up to 16x EV/EBITDA.

• Key Risks:

  • Sharp VIP slowdown.
  • Policy changes.
  • Tighter junket regulations.
  • The smoking ban effective in January 2019.

Key Information

• VIP Growth:

  • Decelerated to 20% yoy in 2018, still outperforming mass GGR.
  • The slowdown is attributed to tight year-end liquidity and a disruption in the Zhuhai underground banking network.
  • Mid-sized junkets are expected to add 12–15 VIP rooms, supporting continued VIP growth.

• Mass Growth:

  • Accelerating to 15% yoy in 2018.
  • Increased visitation from Tier 3 cities, such as Hunan and Hubei.
  • Rising average minimum bets and higher table yield are expected to boost mass GGR.

• Investment Recommendations:

  • Wynn Macau: Buy, with a target price of HKD23.45.
  • MGM China: Buy, with a target price of HKD22.60.
  • Sands China: Upgraded to Buy, with a target price of HKD48.
  • Galaxy: Buy, with a target price of HKD60.15.
  • SJM: Hold, with a target price of HKD7.35.

• EBITDA Forecasts:

  • Wynn Macau: Raised by 1–7% for 2017/18.
  • Sands China: EBITDA lifted by 2–7%, with a target price increase to HKD48.
  • Galaxy: EBITDA growth is expected to be strong, supporting its Buy rating.

• Financial Metrics:

  • Wynn Macau is expected to have a higher EBITDA margin due to margin expansion and rising mass table yield.
  • Sands China and Galaxy are projected to benefit from mass market growth.

Summary Table

Figures and Trends

• Figure 1: Macau casino map (Source: Macau Government Tourist Office)
• Figure 2: 2017 share performance by drivers (Source: Bloomberg, Deutsche Bank)
• Figure 3: 2018 GGR growth by segments (Source: Deutsche Bank forecasts, DICJ)
• Figure 4: Macau GGR/day growth (Source: Deutsche Bank forecasts, DICJ)
• Figure 5: Dec GGR +15% yoy, 2017 GGR +19% yoy (Source: DICJ)
• Figure 6: 4Q17E results preview (Source: Deutsche Bank forecasts)
• Figure 7: 2017E full year preview (Source: Deutsche Bank forecasts)
• Figure 8: 4Q17E Rev and EBITDA growth (Source: Deutsche Bank forecast, Company data)
• Figure 9: Industry headline EBITDA margin improve on mass strength (Source: Deutsche Bank forecast, Company data)
• Figure 10: Quarterly financial summary (Source: Deutsche Bank forecasts, Company data)
• Figure 11: Mass GGR growth accelerating into 2018 (Source: Deutsche Bank, D/CIJ)
• Figure 12: Stable spend per visitor + higher visitation (Source: Deutsche Bank forecast)
• Figure 13: Average min bet (1,900 baccarat tables counted) (Source: Deutsche Bank proprietary table count)
• Figure 14: DB table count: portion of premium mass tables continues to grow (Source: Deutsche Bank proprietary table count)
• Figure 15: Macau total visitor arrivals yoy, benefit from HKZM bridge (Source: Deutsche Bank forecasts, Government data)
• Figure 16: 2018 GGR growth forecast of 17% yoy, higher than Street (Source: Deutsche Bank forecasts, Government data)
• Figure 17: 2018E DB vs Consensus (Source: Deutsche Bank forecasts, Company data)

Conclusion

The report emphasizes the importance of mass market growth in 2018, driven by increased visitor numbers and rising average minimum bets. While VIP growth is expected to decelerate, it remains a strong segment. Sands China is upgraded to Buy due to its potential to benefit from mass growth, while Wynn Macau is highlighted as the top pick with re-rating potential. The report suggests that the market is undervalued and that investors should consider buying on dips, especially for Sands China and MGM China.