Macau industry market cap to double by 2022: MS

Analysts at Morgan Stanely expressed optimism for Macau’s gaming industry over the medium term, with expectations of a market cap doubling by end-2022, driven by improving infrastructure and higher multiples.

According to analysts, a combination of infrastructure developments, supply additions, visitation from China’s lower-tier cities, and an increase in Chinese spending power could drive Macau GGR to reach US$50 billion by 2022, up from US$38 billion in 2018.

Morgan Stanley said it believes the industry’s market cap could grow to US$200 billion in 2022, doubling the current value.

“Along with the opening of HZMB in October 2018 and the high-speed rail extension to Hong Kong, we expect increased visitation potential from China’s lower-tier cities. With the recent license extensions for SJM and MGM, the risk of license renewal has also declined.”

That being said, analysts’ bullishness could be impacted should there be disruptions related to licenses and regional competition – even though the chances are low.

“In March 2019, the concessions for SJM and MGM were extended to June 2022 (the same as the other four concessionaires). Both companies paid US$25mn to the government and MGM paid MOP20mn to SJM. This confirms to us that the license risk is overblown, and while there will be a rebidding process before the June 2022 expiry, it is unlikely that any of the six operators will lose their licenses or have to pay significant renewal fees.”