he research is based on the estimation of 6% growth in visitation and 5% increase in spending.
Morgan Stanley also states dividends/capital returns will grow from the current US$3 billion per annum to more than double in 2020. This will be helped by a fall in capex from US$5 billion per annum in the last four years to US$2 billion per annum, as most part of the new properties gaming are completed.
Analysts say a new uptrend cycle has started, which will be driven by an improvement in growth quality as “80% of the forecast profit should come from the mass market segment.” They brokerage also suggested the Hong Kong-Zhuhai-Macao Bridge and Hengqin will be a “game-changer” in such market evolution.
The research also provides an improved outlook for 2018 and 2019. Morgan Stanley raised its GGR growth forecast for 2018 to 11% from 9%, and to 12% in 2019 from 8 %. Consequently, the report upgrades Macau’s industry view from ‘In-line’ to ‘Attractive on positive near/medium/long-term outlook.’
The base of the expected growth is directly linked to a change in the economic structure of Mainland China, the report notes.
“Our China economists are projecting the country to transition into a high-income country by 2027, which directly drives Macau revenue, and infrastructure should support more visitation,” Morgan Stanley states in the report.
SJM Holdings and MGM China are expected to lead the growth, as they are the latest firms opening resorts in Macau. The brokerage said that there is a “high likelihood of doubling the profit and tripling the dividend”, for them.
Wynn Macau, Wynn Resorts, MGM Resorts and Galaxy could also see 100% upside if they “can pay the majority of their cash flows as dividends”, the research says.
The information flags probable risks including “regional competition from Japan/Korea, material financial commitments for license renewal, tightening of credit in China and regulations, RMB devaluation and the planned smoking ban in Macau in 2019.”