Asia gaming and consumer discretionary analyst

Michael Ting

Thematic (Sector/Industry)

Macau August GGR (gross gaming revenue) continued to be weak -94.5% yoy despite the resumption of visas from Zhuhai and the rest of Guangdong Province during the month. We expect September GGR to decline 94% yoy given lower seasonality. Our channel checks for October Golden Week hotel bookings indicate Macau travel demand could be weaker vs. previous Golden Week periods. Overall, we expect the recovery in Macau sector revenues to be a slow process. Top sector pick is <a href="https://www.smartkarma.com/entities/sjm-holdings-ltd" target="_blank" data-smartkarma-citation="entities:805:1" rel="noopener">Sjm Holdings (880 HK)</a> .

Macau August GGR (gross gaming revenue) continued to be weak -94.5% yoy despite the resumption of visas from Zhuhai and the rest of Guangdong Province during the month. We expect September GGR to decline 94% yoy given lower seasonality. Our channel checks for October Golden Week hotel bookings indicate Macau travel demand could be weaker vs. previous Golden Week periods. Overall, we expect the recovery in Macau sector revenues to be a slow process. Top sector pick is Sjm Holdings (880 HK) .

Macau August GGR: When Do the Punters Return?

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

The Asia HY Trade Recommendations report for the month of August includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index.

  The Asia HY Trade Recommendations report for the month of August includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Recommendations - August 2020 - Lucror Analytics

We compiled 2Q20 Macau gaming market share from the gaming operators' financial reports. One key takeaway is that VIP GGR as a percentage of the total has risen for the third consecutive month. This helps headline sector GGR growth,  but may result in slower sector EBITDA recovery given low VIP margins relative to mass. A second takeaway is that with low VIP turnover, VIP hold rates have a significant divergence from historical norms leading to market share figures which are outliers compared to historical values. We believe hold rates will remain volatile until gaming volumes normalize hence would not read too much into current headline GGR market share numbers. Assuming gaming demand normalizes in FY21, our top sector pick would be <a href="https://www.smartkarma.com/entities/sjm-holdings-ltd" target="_blank" data-smartkarma-citation="entities:805:1" rel="noopener">Sjm Holdings (880 HK)</a> which has the potential to at least see a 50% increase in EBITDA next year given the opening of Grand Lisboa Palace.

We compiled 2Q20 Macau gaming market share from the gaming operators' financial reports. One key takeaway is that VIP GGR as a percentage of the total has risen for the third consecutive month. This helps headline sector GGR growth,  but may result in slower sector EBITDA recovery given low VIP margins relative to mass. A second takeaway is that with low VIP turnover, VIP hold rates have a significant divergence from historical norms leading to market share figures which are outliers compared to historical values. We believe hold rates will remain volatile until gaming volumes normalize hence would not read too much into current headline GGR market share numbers. Assuming gaming demand normalizes in FY21, our top sector pick would be Sjm Holdings (880 HK) which has the potential to at least see a 50% increase in EBITDA next year given the opening of Grand Lisboa Palace. 

Macau 2Q20 Market Share Review: Outliers Everywhere with an Unfavorable Mix

Melco Resorts’ Q2/20 earnings were weak, as expected. Even so, the company slightly outperformed its peers, thanks to the contribution from its non-Macau assets and a steady performance from Mocha clubs. The liquidity profile remains strong, supported by the high cash balance. During the earnings call, management commented that the gaming recovery should be gradual over the near term, not V-shaped.

  Melco Resorts’ Q2/20 earnings were weak, as expected. Even so, the company slightly outperformed its peers, thanks to the contribution from its non-Macau assets and a steady performance from Mocha clubs. The liquidity profile remains strong, supported by the high cash balance. During the earnings call, management commented that the gaming recovery should be gradual over the near term, not V-shaped. 

Melco Resorts - Earnings Flash - H1 FY 2020 Results - Lucror Analytics

In this month’s “In-Focus” section, we discuss LARA and Credit Bias developments for companies under our coverage over the past few years, including related trends for and between Asia, LatAm and Europe. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s “In-Focus” section, we discuss LARA and Credit Bias developments for companies under our coverage over the past few years, including related trends for and between Asia, LatAm and Europe.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - LARA And Credit Bias Study (2020 Update) - Lucror Analytics

Hong Kong

Melco Resorts & Entertainment Limited develops, owns, and operates casinos. The Company offers casino gaming, restaurants, bars, and resorts facilities. Melco Resorts & Entertainment serves customers in Asia.

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Melco Resorts & Entertainment (MLCO US)

Macau August GGR: When Do the Punters Return?

Macau August GGR (gross gaming revenue) continued to be weak -95% yoy despite the resumption of visas from Zhuhai and the rest of Guangdong...

Michael Ting

Asia HY Trade Recommendations - August 2020 - Lucror Analytics

The Asia HY Trade Recommendations report for the month of August includes a summary of our recommendations, as well as our high-conviction ideas....

Lucror Analytics

Melco Resorts - Earnings Flash - H1 FY 2020 Results - Lucror Analytics

Melco Resorts’ Q2/20 earnings were weak, as expected. Even so, the company slightly outperformed its peers, thanks to the contribution from its...

Lucror Analytics

Asia HY Monthly - LARA And Credit Bias Study (2020 Update) - Lucror Analytics

In this month’s “In-Focus” section, we discuss LARA and Credit Bias developments for companies under our coverage over the past few years,...

Lucror Analytics

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Macau August GGR: When Do the Punters Return?

Macau August GGR (gross gaming revenue) continued to be weak -95% yoy despite the resumption of visas from Zhuhai and the rest of Guangdong...

Michael Ting

Asia HY Trade Recommendations - August 2020 - Lucror Analytics

The Asia HY Trade Recommendations report for the month of August includes a summary of our recommendations, as well as our high-conviction ideas....

Lucror Analytics

Macau 2Q20 Market Share Review: Outliers Everywhere with an Unfavorable Mix

We compiled 2Q20 Macau gaming market share from the gaming operators' financial reports. One key takeaway is that VIP GGR as a percentage of the...

Michael Ting

Melco Resorts - Earnings Flash - H1 FY 2020 Results - Lucror Analytics

Melco Resorts’ Q2/20 earnings were weak, as expected. Even so, the company slightly outperformed its peers, thanks to the contribution from its...

Lucror Analytics

Asia HY Monthly - LARA And Credit Bias Study (2020 Update) - Lucror Analytics

In this month’s “In-Focus” section, we discuss LARA and Credit Bias developments for companies under our coverage over the past few years,...

Lucror Analytics