SJM Holdings Is the Last Casino Licence Holder to Benefit from a Presence in Cotai

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Equity Bottom-Up

<ul><li class="p1">During the past month, authorities have raided pawn shops&nbsp;in Macau that use illegal terminals, economic data in China&nbsp;has shown signs of weakening and Macau gaming revenue&nbsp;in August showed a decline of 35.5% year over year.</li><li class="p1">We&nbsp;plan to adjust our 2015 industry gaming revenue decline&nbsp;from mid-20% to low-30%, partially offset by higher growth&nbsp;in 2017-18 due to the expected completion of the Hong&nbsp;Kong-Zhuhai-Macau bridge in 2017.</li><li class="p1">With a lower revenue base, we have implemented cuts to&nbsp;our fair value estimates: down 15% for MGM China to HKD17.00 per share; down 10% for Galaxy Entertainment to HKD&nbsp;37.00 per share; down 8% for SJM Holdings to HKD 11.00&nbsp;per share; and down 8% for Sands China to HKD 33.00 per&nbsp;share.</li><li class="p1">Our fair value estimate declined by less than 5% for&nbsp;Wynn Macau; thus, we maintain our fair value estimate of&nbsp;HKD 15.00 per share unchanged</li></ul><p>Analysts: Brian Han and Chelsey Tam</p><p>Full report below the fold...</p>

During the past month, authorities have raided pawn shops&nbsp;in Macau that use illegal terminals, economic data in China&nbsp;has shown signs of weakening and Macau gaming revenue&nbsp;in August showed a decline of 35.5% year over year.We&nbsp;plan to adjust our 2015 industry gaming revenue decline&nbsp;from mid-20% to low-30%, partially offset by higher growth&nbsp;in 2017-18 due to the expected completion of the Hong&nbsp;Kong-Zhuhai-Macau bridge in 2017.With a lower revenue base, we have implemented cuts to&nbsp;our fair value estimates: down 15% for MGM China to HKD17.00 per share; down 10% for Galaxy Entertainment to HKD&nbsp;37.00 per share; down 8% for SJM Holdings to HKD 11.00&nbsp;per share; and down 8% for Sands China to HKD 33.00 per&nbsp;share.Our fair value estimate declined by less than 5% for&nbsp;Wynn Macau; thus, we maintain our fair value estimate of&nbsp;HKD 15.00 per share unchangedAnalysts: Brian Han and Chelsey TamFull report below the fold...

Downgrading FVEs of Macau Gaming Coverage; China Economy and Policies Extend Near-Term Uncertainty