The Zhitong Finance App learned that Goldman Sachs published a research report saying that gambling revenue in the third quarter in Macau was generally stable, falling 4% year on year, but benefiting from seasonal recovery in non-gaming revenue in summer, stable competitive environment and cost control, the industry's EBITDA is expected to recover 5% quarterly to US$1.95 billion, down 9% year on year; the EBITDA margin calculated by gross revenue bottomed out to 21.8%, compared to 20.9% in the second quarter.
The bank pointed out that gambling revenue in the third quarter was still weak, mainly due to the diversion of gaming consumption during the World Cup; international air ticket prices rose 30% to 40% year on year and did not begin to normalize until August to September; and negative sentiment brought about by stock market adjustments and the strengthening of capital controls and tax supervision of offshore financial investments in the mainland.
Sands China (01928) and Galaxy Entertainment (00027) benefited from the return of leisure and family travelers, and the market share of gambling increased by 1.4 and 1.2 percentage points to 25.3% and 21.8%, respectively; the market share of Melco Entertainment (MLCO.US) and Aobo Holdings (00880) decreased by 1.5 and 0.8 percentage points quarterly to 13.4% and 9.4%, respectively. The market share of Wynn Macau (01128) and MGM China (02282) remained generally stable.
The bank expects Sands China's third-quarter EBITDA to rise 28% quarterly to US$548 million, the strongest of the six operators covered; Galaxy Entertainment's EBITDA is expected to rise 8% quarterly to HK$3.66 billion; and the EBITDA is expected to fall 12% to US$267 million from quarter to US$267 million due to pressure from operating leverage.
In terms of ratings, the bank maintained a “buy” rating for Galaxy Entertainment, Sands China, Wynn Macau and Macau Entertainment, with target prices of HK$51, HK$19.5, HK$8.1 and $8, respectively; rating MGM China “buy” with a target price of HK$16; and Aobo Holdings rated “neutral” with a target price of HK$1.8. The bank indicates that sector valuations are attractive. EV/EBITDA has fallen to about 7 times, and the average dividend rate exceeds 6%. More meaningful revaluations still depend on the timing and extent of increases in gambling revenue and profit forecasts.