Macau gaming:Weekly table-only GGR at HK$540m

Weekly table-only GGR at HK$540m. According to industry sources, DICJ andAPG estimates, for the week ended 25 Oct 2015, the average daily Macau tableonlygaming revenue estimate is HK$540m (Fig 1), up 21% WoW or 9% belowthe CYTD average of HK$591m. According to the same source, “whilst foottraffic and head counts have been generally flat some quality play in thepremium segment has made a nice contribution.”Galaxy, MGM and Wynn increased their market shares this week. In 3Q15,on an overall GGR market share basis, Sands China (24%), SJM (21%) andGalaxy (22%) were the largest three Macau gaming operators. For the weekended 25 October 2015, market shares were Galaxy 26%, SJM 21%, SandsChina 23%, Melco Crown 13%, MGM 9% and Wynn Macau 10%. According toindustry sources, DICJ and APG, “the luck factor is generally running atexpectations with some minor fluctuations influencing market share. The Galaxygroup still wearing the yellow jersey with SC slipping marginally and MGM andWynn making a mild recovery.”September Macquarie Macau Gaming Index (MMGI): trending down. 1)China residential real estate investment grew -2.4% YoY in Sep 2015 versus -1.3% in Aug 2015; 2) China off balance sheet financing grew +5.1% in Sep 2015versus +4.5% in Aug 2015; 3) China import value grew -20.4% in Sep 2015versus -13.9% YoY Aug 2015.

September visitor arrivals remain stable (+0.4% YoY). DSEC announced thelatest visitor arrivals data. In Sep 2015, the growth rate for total visitor arrivals toMacau was stable, slightly up by 0.4% YoY (Aug 15 -2% YoY, Jul 15 -4% YoY)and the growth rate for Mainland visitors was -1% YoY (Aug 15 -2%, Jul 15 -6%YoY). Mainland visitors accounted for ~65% of total visitors in Sep 2015 and ~67%on a 12-month rolling basis. Separately, the growth rate for same-day visitors wasflat YoY. (Aug 15 -4% YoY, Jul 15 -6% YoY). Same-day visitors accounted for~51% of total visitors in Sep 2015 and ~54% on a 12-month rolling basis.

We remain negative on the sectorWe remain negative on the sector at 13.7x forward EV/EBITDA, which does notjustify the 9% 3-year EBITDA CAGR.

Wynn Macau is our least preferred stock. We believe Wynn Macau will gainmarket share in the next two years, in particular after the completion of WynnPalace Cotai. However, this could be overshadowed by its weak capital positionand near-term liquidity constraint, which led to our FY15E DPS cut toHK$0/share on 21 September 2015. Its recently announced 3Q15 adjustedEBITDA was US$162.8m, down 50% YoY and 6% QoQ. The adjusted EBITDAmargin contracted 672bps YoY and 28bps QoQ to 27.8%.

Sands China: the most defensive pick. Sands China’s higher-than-its- peersexposure to mass market gaming provides downside earnings protection from afurther slowdown in VIP GGR in CY16. Furthermore, we believe Sands Chinacan defend and further grow its market share in the next two years.