Macau gaming:Jan GGR of-21%YoY,or last week at HK$632m

Event

Jan 2016 GGR down 21% YoY. According to the Gaming Inspection andCoordination Bureau Macau, the Jan 2016 gross gaming revenue (GGR) wasMOP18,674m, down 21% YoY, which is above Bloomberg consensus of -24%and our expectation of -28% YoY.

Implied last week table-only GGR of HK$632m. Based on the actualJanuary GGR, the Jan slots GGR estimate of HK$907m and first 24 daystable-only GGR of HK$12.8bn, the implied table-only daily GGR for the last 7days was HK$632m, which was 37% above the HK$460m achieved for theweek-ended 24 Jan 2016 and 9% above the CY15 average of HK$580m.

CY16E/CY17E/CY18E GGR forecasts. We expect CY16E/CY17E overallGGR growth to be -13%/+0%. However, the Macquarie Macau Gaming Index(MMGI) indicates that GGR growth should be -11%/-10% in CY16E/17E. Weexpect the overshoot of Macau GGR decline will gradually reverse from 2H16onward.

Dec visitor arrivals up 3.7% YoY. According to the Macau Statistics andCensus Service (DSEC), in Dec 2015 the growth rate for total visitor arrivalsto Macau was at +4% YoY (Nov -8% YoY and Oct -1% YoY), and the growthrate for Mainland visitors was up 1% YoY (Nov-15 -13% YoY and Oct-15 0%YoY). Mainland visitors accounted for ~63% of total visitors in Dec 2015 and~66% on a 12-month rolling basis. In Dec 2015, the growth rate for same-dayvisitors was -5% YoY (Nov 15 -14% YoY and Oct 15 -4% YoY). Same-dayvisitors accounted for ~49% of total visitors in Dec 2015 and ~53% on a 12-month rolling basis.

We retain a cautious view on the sector at 11.8x forward EV/EBITDA, whichin our view does not justify the 2% four-year EBITDA CAGR. We continue tobelieve the worst is yet to come, with negative operating leverage anddividend cuts coming. Wynn Macau has 21% downside potential to our targetprice.

Latest Macquarie Macau Gaming Index performance (December):China residential real estate investment of -2.7% YoY in Dec 2015. This isone of the three pillars of the Macquarie Macau Gaming Index (MMGI). Thelinear regression R squared with Macau GGR is 0.64. In Dec 2015, growthwas -2.7% YoY versus -4.7% YoY in Nov 2015.

China import value growth of -7.8% YoY in Dec 2015. This is one of thethree pillars of the Macquarie Macau Gaming Index (MMGI). The linearregression R squared with Macau GGR is 0.48. In Dec 2015, the growth ratewas -7.8% YoY versus -8.9% YoY in Nov 2015.

China off balance-sheet financing of +2.6% YoY in Dec 2015. This is oneof the three pillars of the Macquarie Macau Gaming Index (MMGI). The linearregression R squared with Macau GGR is 0.51. In Dec 2015, off balancesheetfinancing came in at RMB23,172bn, up +2.6% YoY, vs +3.5% YoY inNov 2015.