UBS released a research report saying that the operating expenses, competitive environment and non-gaming business development of gaming companies in Macau are becoming positive, and that they are optimistic about the prospects of the industry, and prefer Sands China (01928).
As far as demand is concerned, Macau gaming companies are generally optimistic about the sustainability of midfield gaming revenue recovery. Non-gaming activities also enhance Macau's appeal, giving Sands China, Macau International Development (00200), Galaxy Entertainment (00027), MGM China (02282), Wynn Macau (01128), and Aobo Holdings (00880). The target prices are HK$26.9, 7.3, 49.4, 14.3, 8.7, and 3.3 HK$3.3.
According to the report, in terms of operating expenses, operators expect a stable trend in 2024 compared to the fourth quarter yield (run rate) of 2023. Salaries will increase with the inflation rate, and quarterly fluctuations due to the schedule of non-gaming activities. It is expected that operators will maintain rational competition and continue to focus on improving property and service levels and improving marketing efficiency. As sales personnel mainly recruit high-quality midfield customers, it is estimated that competition in related markets will intensify, but this stage will not necessarily lead to higher reinvestment rates. MGM is the only operator with RFID smart gaming tables, but as peers catch up year by year, MGM faces the risk of losing its competitive advantage.