Sands Resorts, Macau

Morgan Stanley reduced its 2022e and 2023e GGR estimates by 17 percent and 3 percent, respectively, to reflect likely ongoing travel restrictions between Macau and the Mainland in 4Q22 and 1Q23. 

Morgan Stanley lowered 2022e and 2023e GGR estimates by 17 percent and 3 percent, respectively, to 15 percent and 43 percent of 2019’s levels. 

The brokerage estimates are 21 percent and 12 percent below the consensus for 2022e and 2023e GGR. 

Morgan Stanley’s forecasts assume travel restrictions between Macau and the Mainland continue in 4Q22 and 1Q23, and the gradual resumption of electronic visas (e-IVS) and package tours to start from 2Q23.

The brokerage maintains that  2024 is the year the industry fully normalizes and keeps their 2024e industry GGR unchanged at 80 percent of 2019 levels.

Morgan Stanley’s 2022e and 2023e EBITDA are 259 percent and 45 percent lower than consensus. 

The firm expects further negative revisions of consensus 2022e and 2023e EBITDA as likely unless there is earlier-than-expected travel easing. 

Morgan Stanley’s 2024e EBITDA expectations are 18 percent higher than consensus.

Investors are hoping that two events in November could help sentiment, MS argues: 

  • The first is the announcement of the final six concessionaires for the next 10 years. 
  • The second is the potential gradual resumption of e-IVS and package tours for mainland Chinese to Macau, which was announced by Macau’s CE recently.

Sands pick

Sands is Morgan Stanley’s preferred pick in Macau for its mass exposure, lower concession renewal risk, and more attractive valuation relative to Galaxy.

Looking at investment/spending by existing concessionaires, the brokerage concludes that the gaming industry has spent a significant amount in Macau since 2007 and expects Sands should see its license renewed. The concessionaire spent US$61bn during the period.

Morgan Stanley argues that Sands has lower concession renewal risk than peers as it’s the largest employer in Macau gaming. 

Sands also generate the highest percentage of revenue from non-gaming at 27 percent. Sands’ total spend, of US$61bn since 2007, is also the highest among peers.