Morgan Stanley expects that the profit margin of Macau gaming stocks slightly narrowed in the last quarter of last year, and is optimistic about Galaxy Entertainment and Sands China

Morgan Stanley's research report indicates that the Macao Gaming Inspection and Coordination Bureau's industry segmentation data has led to a further downgrade of its forecast for the Macao gaming industry in the fourth quarter of 2025.

Morgan Stanley stated that due to an unfavorable shift in business mix (high proportion of VIP customers) and increased operating expenses, it expects a slight decline in profit margins for the fourth quarter of 2025. It anticipates that the industry average adjusted property EBITDA for the fourth quarter will increase by 4% quarter-on-quarter and 13% year-on-year, in line with market expectations.

In terms of individual stocks, Morgan Stanley is optimistic about Galaxy Entertainment (00027.HK) and Sands China (01928.HK), both rated "Overweight"; it downgraded MGM China (02282.HK) to "Market Perform" last December due to higher royalty expenses; and assigned a "Reduce" rating to SJM Holdings (00880.HK).

Morgan Stanley noted that MGM underperformed the market significantly in December, but due to an improvement in its market share for the fourth quarter of 2025, it may see some recovery