Morgan Stanley: a small town in mainland Chinese gamblers

Gaming revenue in Macau rose as much as 17 months, but last year’s revenue was only about 70% of the peak. Morgan Stanley believes that the spending power of small and medium cities in the Mainland to improve and increase interest in gambling in Macau, can make a living force to support the structural growth of gambling revenue, increase medium and long-term forecast in 2022, gambling revenue, the market value of the industry can be higher than 2013 30% annual peak.

Praveen Choudhary, Head of Asian Molding Industry and Head of Real Estate Research in Hong Kong, said in an interview with the newspaper: “After gambling stocks peaked in early 2014, the share price experienced a two-and-a-half-year decline and showed no sign of recovery until the second half of 2016 We conducted a large survey last year and saw a structural increase in midfield in the next five years, which the market did not fully understand. ”

In a survey of about 3,300 Mainland residents last year, Choudhary pointed out that the survey found only about 0.4% of city residents below the third tier and below said they intended to go to Macau for gambling. However, the relevant ratio has risen to 3.3% this year.

VIP room income estimated 2 percent increase midfield

According to the analysis by the bank, with the rapid growth of household incomes in small and medium-sized cities in the Mainland and the narrowing gap with first-tier cities, with the increase of infrastructure such as Hong Kong-Zhuhai-Macao Bridge, Macau and Hengqin hotels and visas and other infrastructure facilities, 10%, representing an average increase of 5% over the first-tier cities, making the average annual growth of mid-market revenue up to 12%, which is more optimistic than the forecast of 10% growth.

According to the latest forecast by Morgan Stanley, gambling revenue and market cap in 2022 are expected to reach 60 billion U.S. dollars and 260 billion U.S. dollars (about 466 billion U.S. dollars and 2,202 billion Hong Kong dollars) respectively, both of which are about another 30% higher than the peak in 2013.

Last year, the performance of the VIP lounge was bright, and its revenue growth was even better than the midfield. In the short term, Choudhary expected the property market in the Mainland to booming and the capital liquidity was satisfactory. It is expected that this year’s VIP room revenue growth will outperform the midfield, with segment revenue up 20%. Although it dropped 27% from last year, it is still more than mid-term forecast growth 12% is high. The bank expected total gaming revenue this year, an increase of about 16%.

Betting valuation is still low, with rising potential

Choudhary added that due to the relatively high spending of VIP customers in VIP lounges, there is a significant change in revenue as long as there is a slight change in customer gambling intentions. On the contrary, about 80% of EBITDA’s midfielder and non-gaming revenue depend on about 2,000 Million Mainland tourists, the development trend is more stable, more confidence in the forecast.

Ho Casino’s share price has rebounded since 2016 and Morgan Stanley believes that if the valuation is based on the Free Cash Flow to Equity, the current valuation of the sector is still below historical average, This year, casino operators have also increased their dividend expectation.