Macau gross gaming revenue pegged to surge 16% this year

Chinese holidays boosted September growth.

According to Maybank Kim Eng, it is raising its FY13 GGR estimates for the sector to 16% (from 11%) and maintain a GGR forecast of 12.5% for FY14. Sep 2013 GGR came in at MOP28.96b, up 21.4% YoY, underscored by two major Chinese holidays. 

Here's more:

We continue to remain Overweight on the Macau gaming sector for several reasons, including: 1) greater infrastructure development, 2) increasing yield per table with better segmentation of customers and 3) higher discretionary spending.

With the gaming sector outperforming the index, we head back to the drawing board to challenge the Street’s assumptions.

We aggregate the minimum and maximum per-share values of the various Macau gaming operators based on extreme bear- and bull-case EV/EBITDA scenarios of existing core operations and incremental Cotai value under different ROICs assumptions (10-20%).

While upside for most operators seems to have narrowed, we think Galaxy and Melco still have the most upside, based on our valuations.

We like Galaxy for the Street’s undervaluation of its upcoming Cotai expansion, reflecting only the value of its Cotai landbank, and upgrade to BUY. Melco Int’l Development looks attractive for its diverse emerging pipeline of casino project and continuous organic growth.