Macau | Investor analyst forecasts a cyclical downturn for local gaming sector in 2019

A cyclical downturn could take place this year for Macau's gaming sector, according to Morningstar Asia Limited, a Hong Kong based investor analysis company

Macau (MNA) – Morningstar Asia Limited, a Hong Kong based investor analysis company, has released its 2019 forecasts for Macau’s gaming sector, stating that ‘as a result of weaker consumer sentiment, the trade war, and an economic slowdown in China’, a cyclical downturn could take place this year.

But the analyst believes Macau’s gaming market positioning and demand remain strong, with the ‘current weak sentiment’ presenting a good buying opportunity for long-term investors.

-Fair value estimates by Morningstar Asia Limited-

Sands China- HKD45 per share, compared to HKD42 previously

Galaxy Entertainment- HKD58 per share, compared to HKD54 previously

Melco Resorts- US$21 per share (HKD165), compared to US$22 (HKD172) previously

MGM China- HKD20 per share, compared to HKD21.50 previously

Wynn Macau- HKD23 per share, compared to HKD22 previously

Sociedade de Jogos de Macau (SJM) Holdings- HKD7.70 per share, compared to HKD8 previously.

The gaming stocks covered are undervalued according to the analyst, with the exception of SJM Holdings and Melco Resorts.

Meanwhile, the fair value estimates are made under the assumption that gaming licenses will be extended and renewed in 2022, possibly with a 1 per cent increase per year in gaming revenue tax for the next five years.

Morningstar Asia Limited also forecasts Macau gaming revenue growth to ‘decline by low single digits in 2019 before returning to growth of low single digits in 2020, and mid-single digits in 2021 as the Chinese economy recovers.’

VIP gaming revenue could see a decline by high single digits this year and low single digits in 2020, with mass gaming revenue growth to decelerate in 2019 by low single digits, and reaccelerate to high single digits in 2020.

With the opening of Grand Lisboa Palace said to happen in the second half of this year, as well as the The Londoner, and Galaxy Macau phases three and four, the analyst company maintains that Macau presents an ‘attractive high-single-digit annual gaming revenue growth long term’ and should revitalise appeal for the city.