Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

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Equity Bottom-Up

<ul><li class="p1">With Chinese central and Macau governments expected to roll out policies to support Macau's tourism industry, and with new casino openings likely to drive demand, we estimate industry gross gaming revenue will increase annually by 7%, 9%, 8%, 8%, in 2016 to 2019, respectively, versus an estimated drop of more than 30% in 2015.</li><li class="p1">In our view, the recovery in gross gaming revenue, driven by the mass segment, should drive share prices of our Macau gaming coverage toward our fair value estimates.</li><li class="p1">We identify Sands China as the most defensive play for investors who want exposure to the Macau gaming space.</li><li class="p1">Macau will transition to a mass gaming-driven market, as a result of anti-graft policy's long-term impact on VIP gaming revenue and Chinese middle class's increasing outbound travel. W</li><li class="p1">e believe Sands China's strong position in the mass segment makes it the most resilient to unfavourable government policy and allows it to benefit from stronger growth in the mass segment.&nbsp;</li><li class="p2">Among major Macau casino operators, narrow moat-rated Sands China has the largest revenue exposure of 49% to the higher-growth, more sustainable and superior-margin mass gaming and slot segments, and the lowest exposure to the more volatile and riskier Chinese VIP gaming market.</li></ul><p class="p2"><em>Analyst: Chelsey Tam</em></p>

With Chinese central and Macau governments expected to roll out policies to support Macau's tourism industry, and with new casino openings likely to drive demand, we estimate industry gross gaming revenue will increase annually by 7%, 9%, 8%, 8%, in 2016 to 2019, respectively, versus an estimated drop of more than 30% in 2015.In our view, the recovery in gross gaming revenue, driven by the mass segment, should drive share prices of our Macau gaming coverage toward our fair value estimates.We identify Sands China as the most defensive play for investors who want exposure to the Macau gaming space.Macau will transition to a mass gaming-driven market, as a result of anti-graft policy's long-term impact on VIP gaming revenue and Chinese middle class's increasing outbound travel. We believe Sands China's strong position in the mass segment makes it the most resilient to unfavourable government policy and allows it to benefit from stronger growth in the mass segment.&nbsp;Among major Macau casino operators, narrow moat-rated Sands China has the largest revenue exposure of 49% to the higher-growth, more sustainable and superior-margin mass gaming and slot segments, and the lowest exposure to the more volatile and riskier Chinese VIP gaming market.Analyst: Chelsey Tam

Macau's Mass Gaming Recovery: Sands China to Benefit