Editor's Note: Below is a brief excerpt from a research note sent to institutional subscribers earlier this week written by our Gaming Lodging & Leisure team.
We remain generally negative on the Macau stocks but acknowledge that the December optics (-25% YoY GGR decline vs November’s 32% decline) could favorably impact sentiment.
However, there is still no indication that fundamentals are improving – November was worse than October from a seasonally adjusted GGR perspective. Low hold wasn’t responsible for the sequential degradation but VIP volumes were ugly and, importantly, Mass revenues were below expectations.
Going forward, we are concerned with 2016 where our -9% GGR forecast is below the Street. Same store revenue will look worse, down 19%. Non-gaming will look bad with room rates down in the mid-teens heading into a period of 20%+ room supply growth.
Relative to sentiment, LVS could be most at risk in 2016 given its sizeable valuation multiple and the fact that the new supply will target Sands sweet spot – non-gaming and the Mass segment.
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