Macau Gaming gunning for more investments from US, Europe

Strong recurring cash flows attracting clients.

According to Maybank Kim Eng, it marketed to over 41 investors in US and Europe over the past two weeks. Investors displayed strong interest in the Macau gaming sector, and the consensus was to overweight the mass market segment and operators with exposure to Cotai. The sector looks attractive due to its strong recurring cash flows and attractive dividend yields of some counters.

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Our top pick, Galaxy, attracted less attention due to its high exposure to the VIP segment and lack of an immediate catalyst with two more years for its phase 2’s completion.

Galaxy also has more to prove on the EBITDA margin measure compared to other mass properties. Melco Int’l, received the greatest interest due to its exposure to the rising Philippines gaming industry, though they remain uncertain about fair valuations and future earnings.

Investors agrees with the consensus of long for Sands, though valuation is starting to look stretched at 17x EV/EBITDA. Some investors seem to be attracted to Wynn’s price underperformance against other Cotai operators and may start to chase the laggard.

Wynn could also show bottom-line surprise from low market expectations.