时间:2017年11月15日 12:01:30 中财网
A good quarter: VIP pumping while margins risingOn the back of 7% qoq GGR growth, Macau's 6 operators grew industry EBITDAby 11% qoq in 3Q17. A big surprise from the 3Q17 earnings season is marginexpansion. Originally, the market was worried that strong VIP growth would dragmargins as VIP margin is much lower than mass margin. As it turned out, industryEBITDA margin actually rose 90bps qoq to 22.8% in 3Q17, as the negativeimpact from mix shift was more than offset by a disciplined cost environmentand operating leverage. This should give confidence to the Street to lift marginfor 2018. Reiterate Wynn Macau (Buy) as our Top pick where our 2018 EBITDAforecast is 8% above consensus.
Key insights from 3Q17 earnings season
VIP sharply outgrew mass. After adjusted for smoking premium massre-classification, adj VIP GGR grew 10% qoq (36% yoy), much strongerthan adj mass GGR growth of 4% qoq (9% yoy)。 In fact, given summeris a strong season for mass, the muted mass GGR growth of 4% qoq isslightly disappointing.
Promotional environment remained disciplined . Comps as a % of masstable GGR were flat qoq at 12.0%. Cotai saw a 30bps increase to 12.7%in 3Q (12.4% in 2Q) but this was offset by Peninsula down 100bps qoq to9.8%。 Wynn Palace's comps ratio declined for 5 consecutivequarterly from 31% at opening in 3Q16 to 20% by 3Q17, suggestingthe property are reaping benefits from customer re-investments in priorquarters.
Margins surprised on the upside . Industry EBITDA margin improvedfrom 21.9% in 2Q to 22.8% in 3Q, beating our flattish forecast. BothSands Parisian and Wynn Palace scored well. Parisian EBITDA margin+90bps qoq to 32% and Wynn Palace +380bps qoq to 25%. Labour costsremained stable across all operators.
Galaxy gained market share the most; SJM lost. Galaxy grew the mostGGR market share sequentially in 3Q to 23.0% (2Q: 21.9%), thanks tostrong VIP GGR in Cotai, which added two new junkets. SJM's GGRmarket share continued to slide from 16.5% in 2Q to 15.5% in 3Q.
Wynn & Galaxy have the most potential for a consensus upgrade. Wesee consensus 2018 GGR growth of 9% too conservative (vs DBe +13%yoy)。 Surprises will likely come from VIP, which we think will likely grow
15% yoy, much higher than consensus expectation of 8% yoy VIP GGR for2018. This translates to consensus upside for Wynn Macau and Galaxy.
Wynn Macau 2018 consensus is only 9% above annualized 3Q17 EBITDA,suggesting the Street has only factored in a mild ramp-up.
Free cash flow yields attractive for Wynn Macau & MGM China; key risks
Macau stocks are trading at 14.1x DB 12m fwd EV/EBITDA, at +1 standarddeviation over historical average. We view current valuation as reasonable in anupcycle. We see valuation for our top pick Wynn Macau particularly attractive,given its 7% 2018 FCF yield. We value Macau stocks on SOTP. Downside risksinclude a sharp slowdown in GGR momentum and regulatory changes. Upsiderisks include faster-than-expected GGR growth in 2018.
□ .K.a.r.e.n. .T.a.n.g  .德.意.志.银.行.股.份.有.限.公.司
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