Macau GGR Trends Solid, Says Goldman (LVS) (MGM) (WYNN) (MPEL)

Goldman Sachs views Macau GGR trends as solid despite weaker data recently. Analyst Simon Cheung expects a solid Q1 run rate, although VIP GGR is expected to be slower.

"Macau’s headline GGR trend remained solid, up 20% yoy in 1Q14 (vs. 25% yoy in 4Q13), helped by resilient mass-market GGR +39% yoy on 14% PRC visitation growth in Jan- Feb. As flagged in our Dec report, VIP GGR growth slowed from 18% yoy in 4Q13 to 12% yoy in 1Q14, since junkets have not been as aggressive in credit extension and casinos allocated more resources to mass-market. We expect this trend to continue and maintain our 16% GGR growth forecast in 2014, implying 15% yoy for the rest of year taking into account potential capacity constraints in hotel rooms during the 3Q/4Q peak season," said Cheung.

"We believe near-term price performance will still hinge on fund flows, market positioning and sector rotation (i.e., old to new economy stocks). But for investors taking a long-term view, sector valuation looks quite compelling especially looking out to 2015. It is trading at 15.6x 2015E P/E and offers 4% dividend yield. We still like Sands China for earnings upgrade from table efficiency gain – our 2014E/2015E EBITDA are 6%/4% above Bloomberg consensus. Despite volatile market share trend in view of Wynn’s greater emphasis in premium mass segment, we remain positive on MGM China’s ability to drive table yield improvement and deliver above-industry growth with its Cotai project. With both parentcos expressing interest to invest in Japan, we expect their dividend payout to remain generous to potentially uplift cash for the parentcos to fund the projects. After the recent pullback, Galaxy’s valuation no longer looks stretched; it is in line with its peers on 2015E P/E and FCF yield," he added.

For an analyst ratings summary and ratings history on Melco Crown Enter. click here. For more ratings news on Melco Crown Enter. click here.

Shares of Melco Crown Enter. closed at $37.86 yesterday.

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