Latest news for MGM China Holdings (OTC:MCHVF) Stock

MGM China is one of six casino license holders in Macao and operates two integrated resorts: the MGM Macau resort in the Peninsula and MGM Cotai in Cotai. The company is allowed to operate 750 gaming tables during its new 10-year concession period of 2023-32.

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Goldman Sees An Alpha-Generating Opportunity In Macau Gaming

MGM-Macau VIP Revenue At 5 Year Low

MGM CHINA HOLDINGS ORD by MGM China Holdings, Ltd.

MGM China Holdings Ltd

MGM China Holdings

A more favorable policy background and stable Yuan outlook have helped Macau Gaming stocks not to only re-rate, but also to outperform the market by 10 percent in what&rsquo;s gone of 2016. However unlike the past couple of years, shares moved in very different directions. While Wynn Macau is up more than 46 percent year-to-date, Melco Crown Entertainment Ltd (ADR) (NASDAQ: <a class="ticker" href="/stock/mpel#NASDAQ">MPEL</a>) has lost almost 16.5 percent.

	Analysts at Goldman Sachs believe, &ldquo;Sector valuation looks fair at close to mid-cycle now.&rdquo; Nonetheless, they &ldquo;still see beta and alpha generation opportunities.&rdquo;

	Having said this, the analysts recommended investors to behave selectively, keeping a close eye on sector trends and earnings revisions. The firm anticipates:
<ul>
	<li>
		1) &ldquo;Slow VIP GGR on regional competition, bad debt risk and closer scrutiny on junkets&rdquo;</li>
	<li>
		2) Faster growth in mass market, with novelty and cluster effects following a few more casino openings</li>
	<li>
		3) Higher contribution of non-gaming to overall profit, driven by retail, although &ldquo;oversupply could pressure rents at existing properties near term (i.e. Venetian).&rdquo;</li>
</ul>

	As per Goldman Sachs&rsquo; fiscal 2017 estimates, Wynn could post EBITDA 25 percent above consensus, while Galaxy and Sands China could miss by 6 percent. Despite the upgrades seen in recent weeks, the experts believe Wynn could deliver further upside, &ldquo;as the market assumes Wynn Palace will only add 1-2% market share with a table yield 40% below the industry avg. a year later,&rdquo; an estimate that Goldman analysts consider conservative, given the company&rsquo;s track record.

	The firm revised its ratings and price target on Macau Gaming stocks as illustrated in the chart below:

	<img alt="" src="https://www.benzinga.com/files/u82070/macau_gaming_gs.png" />

	Source: Goldman Sachs

In a report published Friday, Daiwa Capital Markets analyst Jamie Soo maintained an Outperform rating on MGM China Holdings Ltd (OTC: <a class="ticker" href="/stock/mchvf#OTC">MCHVF</a>) (HKG: 2282). The stance on the overall Macau gaming industry was maintained at Neutral.

MGM China is a leading player in Macau's gaming industry and its strength lies in its defensive cost profile.

In the report Daiwa Capital Markets noted that the Macau gaming industry's gross gaming revenue or GGR for June 2015 was down 36 percent year on year to MOP17.4 billion, with the average daily run rate of MOP 579 million (-12 percent month on month), the lowest since November 2010.

"Our adjusted estimates indicate that mass GGR declined by 28% YoY and VIP GGR was down by 43% YoY. The VIP rolling volume saw a 53% YoY decline. We forecast the industry GGR to decline by 34% YoY in July," analyst Jamie Soo mentioned.

The VIP rolling run rate remained soft and declined by 14 percent month on month to HKD 8.2 billion per day in June, the lowest since November 2009. The decline in VIP rolling on a year on year basis was 53 percent at HKD 246 billion, while reported VIP revenue was lower by 39 percent at HKD 9.3 billion.

"After accounting for table reclassifications, we estimate that VIP revenue fell by 43% YoY," Soo added. The recent changes to Macau's visa policy are unlikely to have a significant near-term impact on GGR, as underlying fundamentals remain weak, the report mentioned.

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