Macau’s concessionaires printed their best combined gaming revenue result in 20 quarters in the December 2024 quarter, but a sector-wide rally of their relentlessly depressed stocks remains unlikely, according to investment bank JP Morgan.
In a Thursday note previewing the upcoming 4Q24 results season, JP Morgan analysts DS Kim, Mufan Shi and Selina Li observed that Macau names are still viewed as “show me” stocks meaning a clear catalyst is needed to spark them back to life.
Nevertheless, they remain positive about results season given that DICJ figures showed a 6% year-on-year and 3% quarter-on-quarter jump in GGR in Q4, including an all-time high for mass gaming revenues.
“These ‘in line’ results were certainly respectable against macro headwinds (and President Xi’s visit), in our view, and helped FY24 consensus remain stable, yet they failed to excite the market, and stocks still pulled back 7% on average in three months,” the analysts wrote.
Investors, they added, appear focused instead on alpha opportunities over a beta play, with particular scrutiny being paid on individual market share gains.
“We expect MGM China to be biggest gainer, with an additional 90bps share quarter-on-quarter to 15.6%, which would comfortably meet its ‘mid-teens’ target,” the JP Morgan note said.
“Galaxy should be the close second, with 80bps share gains to reach its post-reopening highs of 19.7%, as the company yields up its Phase III hotels and revamped gaming floors.
“We believe Sands China was the biggest share donor (down almost 100bps quarter-on-quarter to 23.5%) off a relatively high 3Q base, likely due to higher-than-expected disruptions from Londoner room renovation. This disruption should abate from Lunar New Year into May as renovated suites are rolled out in phases. We estimate that SJM also lost 30bps of share, to 13.6%, reversing its big share gains in 3Q, given normalizing VIP luck. Market shares for Wynn and Melco appear relatively stable (again) in 4Q.”
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