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Asia gaming and consumer discretionary analyst

Michael Ting

Thematic (Sector/Industry)

Macau Hotels, restaurants and leisure / Thematic (Sector/Industry)

<p>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. </p>

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