nalysts are racing to raise their price targets for the Macau stocks. In December, Macau gaming revenue increased 18.6% from a year ago to us$ 4.2 billion, the second highest month on record. Mass table segment, the revenue growth driver, grew at 35.1%. VIP revenue growth registered 12% increase, thanks to a robust junket volume growth of 23.5%. Citi and Nomura already raised their 2014 outlook.
"2014 is the first year since 2005 with no major casino opening to drain growth and will be a year with excess demand given the largest hotel property on the mainland is opening up across the border in Hengqin," analysts at Citi wrote in a report this week.
Wells Fargo analyst Cameron McKnight said revenue growth could accelerate before Lunar New Year because of a positive economic outlook in the mainland and greater tourist numbers. Wells Fargo forecasts annual growth in revenue this month of 14 percent to 18 percent. RBC Capital Markets predicts growth of 24 percent.
Morgan Stanley is also raising its targets. It now has a price target of us$ 28 for MGM (MGM), us$ 89 for Las Vegas Sands (LVS), and us$ 212 for WYNN.
In a research note published today, UBS also chimes in: “We believe Macau gaming revenues in 2014 are likely to end up higher than our us$ 47.6B estimate for the year, especially given that December ended the year at us$ 4.2B, ahead of our expectations, so that our existing estimate for 2014 could see upside.”
One major catalyst for growth is an increase in visitors driven by the long-awaited opening of the Chimelong International Ocean Resort – the largest hotel in mainland China featuring a theme park and man-made beach – on Hengqin, an island that is a 10-minute drive from Macau. The theme park, which is expected to open its doors by the end of January, is forecast to receive over 20 million visitors a year, the bank said. "If we conservatively assume that only one out of five people who visit Chimelong will also cross the border and visit Macau, we could see an incremental 4 million mainland visitors to Macau," it said.
Hong Kong-listed Melco Crown, Galaxy Entertainment and Sands China are Citi's top stock picks in Macau's gaming space. The bank forecasts 37 percent, 29 percent and 26 percent upside for the stocks, respectively, over the next 12 months. "[Melco Crown's] Studio City is the best-located casino in Cotai, situated adjacent to the Lotus Bridge border with the best access to Hengqin among its Cotai peers," the bank said. Cotai is an area of Macau that is modeled on the Las Vegas Strip.
Galaxy Entertainment will be the next operator to open a new casino in the city – the second phase of Galaxy Macau in 2015, which should be a positive catalyst in the medium term, it said. Meanwhile, Sands China will be the group to benefit most from the growth in mass gaming revenue growth in Macau, it added.