New Macau Policy Not Exactly What Market Expected

The new Macau policy over application of visas is "much milder than what the market is hoping for," according to a research report from Deutsche Bank. According to the report, Macau's Chief Executive said Tuesday that Macau is NOT requesting Beijing to expand the Individual Visit Scheme (IVS) as both governments understand that more visitors may hurt the livelihood of locals (e.g. traffic jams). Instead, China announced to improve the IVS visa application process. Effective April 1, eligible individuals can now apply for IVS in the cities where they live or work, and they don't need to go back to their "registered home cities" for visa application, the report added. "We think this new procedure will benefit the millions of migrant workers in the Guangdong province. However, as this easier procedure has already been applied in major cities such as Beijing, Shanghai Tianjin, Chongqing, Guangzhou and Shenzhen, we think the new procedure will only attract low-end, often non-gambling, leisure visitors," analyst Karen Tang wrote in a note to clients. "We maintain our out-of consensus view where we forecast Macau GGR to fall 8% in 2016 (vs consensus -2%) and reiterate our view that Macau GGR will not recover until 2H2017 (consensus expects GGR to recover in 2H2016)," Tang added. The analyst said as Macau stocks are trading at high-end of range at 15x 2016 EV/EBITDA, and sees most downside for Hold-rated stocks -- Galaxy, Sands and Melco Crown Entertainment Ltd (ADR) MPEL. Tang prefers Hold-rated Wynn Macau Ltd. WYNMY for good first quarter ahead.