Overview of the Macau Gaming Sector

The Macau gaming sector witnessed a mixed recovery trajectory in 2024, with gross gaming revenue (GGR) reaching 78% of its 2019 levels. December 2024 GGR fell short of market expectations due to reduced mainland Chinese visitations during President Xi Jinping’s visit to Macau. However, visitation recovery and government projections indicate brighter prospects for 2025, with GGR expected to reach 82% of 2019’s levels.

UOB Kay Hian maintains an OVERWEIGHT stance on the sector with Sands China (1928 HK) as the top pick. Below is a detailed analysis of the key companies covered in this report.

Sands China (1928 HK): A Market Leader in Recovery

Recommendation: BUY

Sands China is positioned as a key beneficiary of the Macau gaming sector’s recovery. The company’s gross gaming revenue (GGR) is expected to accelerate in 2025, driven by the partial completion of property renovations in January 2025 and an increase in upgraded room inventory. UOB Kay Hian maintains a target price of HK\$28.60, which reflects a 36.8% upside from its current share price of HK\$20.90.

Valuation Metrics

• 2024F PE: 21.2x
• 2025F PE: 15.0x
• 2024/25F EV/EBITDA: 11.7x/9.7x

Key Highlights

• The company’s recovery is expected to accelerate in 1Q25.
• Renovations and upgraded inventory will enhance its competitive edge in the high-end gaming and hospitality segments.
• Target price implies 20.5x 2025F PE, offering an attractive valuation.

Galaxy Entertainment (27 HK): A Stable Contender

Recommendation: BUY

Galaxy Entertainment is another strong performer within the Macau gaming sector. With a target price of HK\$46.00, the stock offers a 39.4% upside from its current share price of HK\$33.00. Galaxy’s diversified portfolio and robust financial metrics position it well for steady growth as the sector continues its recovery trajectory.

Valuation Metrics

• 2024F PE: 15.2x
• 2025F PE: 12.0x
• 2024/25F EV/EBITDA: 9.8x/8.4x
• 2024F Dividend Yield: 2.0%
• 2024F ROE: 13.2%

Key Highlights

• Well-positioned to capture growth opportunities in both gaming and non-gaming revenue streams.
• Consistent focus on operational efficiency and visitor experience.
• Attractive valuation relative to its peers, with a solid upside potential.

Macau’s GGR and Visitation Trends

Gross Gaming Revenue (GGR): December 2024 GGR stood at MOP\$18.2 billion, marginally declining 1% month-on-month and 2% year-on-year. This was 4% below market expectations, primarily due to President Xi Jinping’s visit, which softened mainland Chinese visitations. For the full year 2024, GGR increased 24% year-on-year to MOP\$226.8 billion, recovering to 78% of 2019 levels.

Visitation Trends: In November 2024, visitations recovered to 97% of 2019 levels, with 2.8 million arrivals. Of these, 2.0 million were from mainland China, with overnight visitors accounting for 45% of total arrivals. The average length of stay increased to 1.7 days, while hotel occupancy rates reached a robust 95.0%.

Non-Gaming Revenue Insights

Total non-gaming spending by visitors increased 6% quarter-on-quarter in 3Q24 but declined 6% year-on-year to MOP\$18.4 billion. Key segments included:

• Shopping: 43% of total spending
• Accommodation: 27% of total spending
• Food & Beverage: 21% of total spending
• Transportation: 5% of total spending

Average per capita visitor spending was MOP\$2,002, representing a 10% quarter-on-quarter and 15% year-on-year decline.