Coming off of a second quarter which was ‘solid but not great’, analysts at J.P.Morgan are pointing to Galaxy as the ‘best performer’, with flat earnings before interest, taxation, depreciation and amortization (EBITDA) quarter-to-quarter ‘due to its solid mass performance and continued cost discipline’.
On the flip side is MGM as ‘the worst’ given that its EBITDA fell 15 per cent quarter-to-quarter ‘due to share loss in mass and relatively unfavourable luck quarter-to-quarter’. Forecasts for the remaining operators are for ‘3-4 per cent declines in EBITDA quarter-to-quarter’.
For gaming revenues in the second half of the year, the analysts are expecting to see a growth of 5 per cent compared to the first half, which is ‘more or less in-line with historical seasonality of 4 per cent (average since 2010)’. This would imply a 15 per cent year-on-year growth in gross gaming revenues for the whole-2017.
‘We think this is a reasonable assumption, as risks to upside (acceleration in VIP, better-than-expected China macro) and downside (mainly regulatory risk) seem balanced,’ opine the analysts.
In particular, the group points out that during the second quarter of the year a drive ‘by acceleration in VIP growth […] more than offset a modest slowdown in mass,’ noting that ‘such divergence between the two is almost unprecedented’.
Reasons for this include the fact that ‘end-demand indeed has been solid, with old agents/players coming back to the market & new faces emerging,’ pointed out the analysts, opining that ‘this was driven by favorable macro drop of 2016 and slower anti-corruption campaign (at least until early 2017) with some time lag’.
Regarding Galaxy, the analysts opine that ‘the property still has more legs to ramp up, especially in premium-mass segments, by yielding up tables/rooms via data analytics and optimization of patron mix.’ Predictions are for same-store performance on the property to ‘continue to be impressive and surprise the market, in turn pushing the stock to grind higher’.