Near term headwinds to limit investor appetite: Bernstein

Investor concerns over decelerating growth, the Chinese economy, and the escalation of US-China trade tensions will likely create headwinds for GGR in the short to medium term, said Bernstein in a note on Monday.

In 18Q2, GGR grew by 17 percent year-on-year, down from 21 percent in 18Q1 and 21 percent in 17H2. Bernstein said that the deceleration observed in both VIP and mass GGR is a preview of the slowing growth that Macau will experience over the next 12-18 months.

Looking at stock valuation, Bernstein said that robust valuation expansion in the near term is less likely, and that specific stock performance should be driven by individual company catalysts and execution.

“If China economic slowdown does not materialize as we expect, there is upside risk to our estimates and valuations, largely on the VIP side,” said Bernstein.

In the long term, improvements in transportation infrastructure and the opening and ramp up of new casino resorts will support long-term growth in mass, and thus, Macau’s long-term growth story, said Bernstein.

With this in mind, Bernstein estimates GGR growth of 14 percent in 2018, with mass to grow 17 percent and VIP to grow 11 percent. Industry-wide EBITDA is expected to grow 21 percent.