Morgan Stanley sees 4 percent Macau GGR drop in 2015

Morgan Stanley expects gross gambling revenue to decline 4 percent in 2015, following a 2.6 percent drop in 2014, but says most of that will be due to weakness in the first half, with the second part of the year likely to see a sharp rebound.
Revenue in H1 is likely to be down 18 percent, but will grow about 14 percent in the H2 as new supply comes on line from Galaxy Entertainment’s Galaxy Macau Phase 2 in May and Melco Crown Entertainment’s Studio City resort in September.
The investment firm said it also expects incremental table growth at SJM Holdings, Wynn Resorts and Macau Legend.
However, it said the ongoing weakness in the VIP segment will continue, meaning organic growth in Macau is likely to drop 8 percent in 2015 and a further 6 percent in 2016.
Although the first half is expected to show a big decline on an annual basis, sequentially, Morgan Stanley said there should be an improvement starting in Q1.
“We expect rate cuts and an improving Chinese property market to support VIP business, partly offset by higher scrutiny of agents/junkets,” it said.
After declining more than 40 percent in 2014, Morgan Stanley sees casino company shares outperforming from early 2015.
In the medium term, it sees Galaxy and Melco as outperforming driven mainly by new capacity.
However longer term it sees outperformance from Wynn and MGM China, which are starting from a lower base.