Earlier today, the Asia-Pacific research team of Morgan Stanley, a popular American provider of various financial services, issued a special report on the likely performance of Macau’s casino operators on stock markets in 2015.
Their stock performance in 2014 was relatively poor as they underperformed the so-called Hang Seng Index by the considerable 41%.
A few days ago, Melco Crown Entertainment Ltd. filed an application to have its stocks on the Hong Kong Stock Exchange delisted. And in December 2014, the gaming operator was removed from the NASDAQ Q-50 Index due to its performance which, as it happens, was not particularly impressive.
Yet, the report issued by Morgan Stanley bodes relatively well for the shares of the city’s gaming operators in 2015. For instance, the research house predicts that gaming revenue will have its moderate improvement. In addition, more substantial free cash flow is expected to be generated.
According to Morgan Stanley’s analysts, the completion of Galaxy Macau Phase 2, which is scheduled for mid-2015, and the launch of Melco Crown’s Studio City is likely to bolster local market.
The research house expects that mass-market revenue will remain flat in 2015. It is to mark a 9% drop in the first half of the year and to score an 11% rise in its second half.
However, Morgan Stanley’s experts pointed out in their report that certain issues related to the increase in labor costs might throw a shadow over the launch of the new gambling venues in Macau.
The paper, which was entitled ‘Asia Insight: 2015 – Change of Luck’ and was compiled by managing director Praveen Choudhary and market analysts Alex Poon and Thomas Allen, pointed to an 8% free cash flow yield and a 5% dividend yield.
The report also referred to the fact that Wynn Macau is expected to add forty gaming tables. Furthermore, SJM will add ten more. According to the research house, these expansions will certainly be beneficial to local industry.
Analysts also stated that they expect dividend cuts. According to research that they carried out previously, the net cash position of local gambling sector fell by 40% by the end of last year’s third quarter as compared to the figures posted towards the end of 2013. Dividend yield is expected to fail to keep up with cash flow yield for the first time.
Morgan Stanley’s paper mentioned other factors that might have a negative impact on the market such as Chinese President’s call for stricter monitoring of local gambling industry and VIP players and junket operators, in particular.
