Weak sentiment a buying opportunity: Morningstar

Analysts from Morningstar have echoed recent calls for investors to hold onto their Macau gaming stocks, despite fears around China’s economic slowdown and the US trade war.

On Monday, equity analyst at Morningstar, Chelsea Tam, said that current weak sentiment presented a good buying opportunity for long-term investors.

“All of the Macau gaming stocks we cover appear undervalued with the exception of SJM Holdings and Melco Resorts,” said Tam in an analyst note.

Tam said she expects Macau gaming revenue growth to decline single low digits in 2019, driven by a high-single-digit decline in VIP gaming revenue, and a low single-digit deceleration in mass gaming revenue – which come as part of China’s cyclical downturn.

However, Tam said the downturn will be nowhere near the one observed in 2015 when China began its corruption crackdown.

“We do not expect the gaming sector will see a downturn as severe as 2015 as we have not seen signs of a gaming bubble this time around,” Tam added.

Morningstar says it maintains its long-held view that the region presents attractive high-single-digit annual gaming revenue growth long term.

“The opening of Lisboa Palace, Londoner, and Galaxy Macau phases three and four, along with the new resort openings in the past few years, should revitalize appeal for Macau and drive gross gaming revenue in the coming decade,” added Tam.