Macau gaming:Dec-16GGR tracking at 5-13%y-y growth

Dec-16 performance so far in line with historic seasonality

    Average daily gaming revenue (GGR) excluding slots came in at HKD630mwhich was up 10% from HKD575m in November 2016, in line with historicseasonality (Fig. 1). If we assume average daily GGR of HKD570-640m forthe rest of the month (vs. HKD575-646m for Oct-Nov), full-month December2016 GGR will come in at HKD18.8-20.2bn (up 5-13% y-y). That might putan end to the series of GGR growth improvements over the past fewmonths, as we saw 1%, 7%, 9% and 14% growth in August, September,October and November, respectively.

    Sector comment: We continue to believe the sector is likely to tradesideways in 2017F, as despite the recent sell-off, we are only seeing 4%average upside to our 12-month target prices for the Macau stocks underour coverage, while the sector valuation remains unattractive at 14.5x 2017FEV/EBITDA (1 S.D. above long-term average). As detailed in our recentreport (Macau gaming - Don’t chase the rally; Focus on the laggards), Massgaming continues to improve but most of that seems to be priced in. VIPsegment seems to be showing signs of improvement, but we do not thinkthat will be sustainable as Beijing will likely implement further tighteningmeasures if the VIP market continues to strengthen. Stock picking is key andwe believe investors should focus on laggards with more attractivevaluations. Our top picks are MGM China (2282 HK, Buy) and SJM (880 HK,Buy).

    For further details, please refer to our reports: Anchor Report: Macau gaming -Lessons from Las Vegas (22 July 2016) Quick Note - Macau gaming - A loud andclear message from Beijing (9 December) and SJM Holdings (880 HK, Buy) -Chase the laggard (9 December 2016).