Macau’s gaming industry recorded ‘mild’ performance during the recent Chinese New Year holiday period, while persistent promotional pressure continues to weigh on profitability, according to a Morgan Stanley research note.
The bank said it remains cautious about the sector’s near-term earnings outlook, warning that it has ‘low confidence that industry margin has bottomed’.
In a report published on February 24th, analysts Praveen K. Choudhary, Anson Lee, and Stephen W. Grambling said holiday performance was uneven, with weaker activity in the early days of the festive period followed by a modest improvement toward the end. ‘Macau had a mild CNY, although everyone is hopeful about a longer tail’, they wrote.
Morgan Stanley also pointed to signs of stabilization in marketing incentives and discounts at some operators. However, it cautioned that similar patterns in previous cycles had failed to translate into a sustained recovery in profitability. ‘Operators highlighted stabilized promotional activities. But we have heard this before’, the analysts said.
The bank estimated that gross gaming revenue (GGR) in February is tracking at low-single-digit year-on-year growth. Meanwhile, revenue for the first two months of 2026 could still rise by about 13 percent year-on-year, supported by improving travel flows and seasonal factors.
Visitor numbers remained resilient during the period, underpinned by the recovery in cross-border travel and regional tourism. However, weaker spending patterns among gamblers were also observed. ‘Visitor growth has been robust, but spending per capita is lower and hotel rooms are a bottleneck’, the analysts noted.
Morgan Stanley further observed that the average age of gamblers has declined over time, reflecting shifting demographics and consumption habits. While this trend supports long-term market sustainability, it may also contribute to lower average spending and greater sensitivity to promotional offers.
Despite near-term challenges, the bank maintained a relatively constructive view on the sector’s structural outlook. It said Macau’s gaming industry has matured and is increasingly focused on generating stable cash flow and dividends rather than pursuing aggressive expansion. ‘Instead of growth, it promises high cash flow and dividend yield, which can grow steadily’, the analysts wrote.
Valuations remain attractive if operators can defend margins, Morgan Stanley added. The bank continues to favor Galaxy Entertainment as an industry proxy and Sands China for dividend yield, while describing Wynn Macau and Melco as relatively undervalued. SJM Holdings, meanwhile, could deliver a significant earnings swing in 2026 if market share and cost controls improve.
As of now, two operators, SJM Holdings and Galaxy Entertainment, have yet to release their fourth-quarter 2025 results.
