Morgan Stanley's research report pointed out that although there is continued optimism regarding the late spring effect for Macau casinos, the performance during the Lunar New Year was moderate. Moreover, Morgan Stanley expressed concerns about profit pressure due to promotional activities at various casinos. On a positive note, Macau’s gaming revenue has performed better compared to other Chinese consumer stocks, with no artificial intelligence risks. Additionally, sustained growth in cash flow and dividends makes casino stocks in Macau attractive in terms of valuation.
Morgan Stanley noted that while casino operators emphasized that promotional activities have stabilized, similar statements were made previously, and confidence remains low regarding whether industry profit margins have bottomed out. Although the early part of the Spring Festival holiday showed weakness, it rebounded later. Total gaming revenue for this month is expected to record low single-digit year-on-year growth, but the first two months of the year could still achieve a 13% year-on-year increase.
However, Morgan Stanley highlighted that while visitor numbers to Macau have grown strongly, per capita spending has declined, and hotel room supply is facing a bottleneck. The average age of gamblers has also decreased over time.
Morgan Stanley prefers Galaxy Entertainment (00027.HK) as an industry representative and Sands China (01928.HK) for its high dividend payouts. Wynn Macau (01128.HK) and Melco Resorts (MLCO.US) are considered undervalued; SJM Holdings (00880.HK) may experience significant fluctuations in EBITDA by 2026. Below are Morgan Stanley’s ratings for Macau casino stocks:
Stock | Investment Rating
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Sands China (01928.HK) | Overweight
Galaxy Entertainment (00027.HK) | Overweight
MGM China (02282.HK) | In-line with Market
Wynn Macau (01128.HK) | Overweight
Melco Resorts (MLCO.US) | Overweight
SJM Holdings (00880.HK) | Reduction
