Divergence in casino growth in the horizon for Macau gaming in 2015

It involves casinos with new openings.

Heading into 2015, it is expected that Macau Gaming stocks will see a divergence in stock performance.

According to a research note from Barclays, it involves those casinos having new openings gaining significant market share.

Meanwhile, the report estimated double-digit EBITDA growth in 2015 for Barclays' top picks – Melco and Galaxy – and they should gain significant market share as players have not been to new casino openings for three years.

It also expects Sands China to benefit from the likely increase in Cotai traffic, while Wynn, MGM and SJM could see significant growth after their new Cotai casinos are open in 2016/17.

However, if 2015 sector GGR is weak, EBITDA y/y declines could be seen over 2015. Barclays expects Melco, Galaxy and Sands to outperform Wynn, MGM and SJM in 2015.

Here's more from Barclays:

Lower GGR: Our 2014 GGR estimate is now for a fall of 1% y/y (previous: +5%) and our projection for 2015 is now +3% (previous: +11%). October Golden Week VIP play saw significant y/y declines.

With no change in China's anti-corruption environment and the macro environment, we expect VIP revenue to be down 37% y/y in 4Q14 and down 7% in 2015. We expect 11% y/y mass GGR growth in 4Q14 and 18% in 2015.

Versus consensus: Our 2015 industry EBITDA forecast has been revised down by 13% and is now 10% lower than the current Bloomberg consensus estimate (and 23% lower than the peak consensus forecast in this year).

Stock prices across our Macau Gaming coverage are down 31% on average year-to-date.

Catalysts & Risks: Near term negatives:

1) October mass revenue figures are due early-November, and the impact from the smoking ban, if any, could put pressure on stocks in the short term; and

2) consensus EBITDA downward revisions. Longer term positive catalysts:

1) we expect the worst of the y/y declines in GGR this cycle to be over in 4Q14, that the decline narrows in 1Q15, and then that GGR resumes to positive growth by mid-2015; and

2) Galaxy Macau Phase 2 opening should give investors comfort about table allocations for new openings.

3Q14 unexciting: We expect 3Q14 industry EBITDA to be down 4% q/q and 2% y/y.

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