Macau gaming:Sept-16GGR tracking at 5-9%y-y growth

Sept off to a good start; M-M decline of 3% or less would be positive.September thus far has been off to a good start with average daily gamingrevenue (GGR), excluding slots, for the first 11days of the month up 1% wwto HKD609mn (Fig 1). According to our industry consultant, strong VIPvolumes, high VIP win rate and the help of two weekends were key reasonsbehind the resilient GGR. Assuming average daily GGR (excluding slots) ofHKD520-550mn for the remainder of the month (vs HKD557mn in Aug-16and HKD524mn in Sept-15) as we factor in the pre-golden week lull wouldimply Sept-16GGR of HKD17.5-18.1bn (up 5-9% y-y, down 1-4% m-m).

    Sector comment: We maintain our cautious stance on the Macau stockswith the sector trading at peak-cycle valuation of 15x 2017F EV/EBITDA andbullish expectation on the new openings. Aug-16and MTD Sept-16GGRwere undoubtedly strong, but we are concerned of the sustainability andquality of the GGR improvement as our recent casino visits and commentsfrom our industry consultant both point to weak mass gaming performance atthe newly opened Wynn Palace, with most of the GGR strength driven bythe low-margin VIP business. Sept-16GGR will continue to be key to watchand a M-M decline of 3% or less would be a positive sign suggesting newopenings were successful in growing the market. While, we are cautious onthe overall sector, we still have a Buy on MGM (2282HK) for its attractivevaluation.