Citi expects Macau's gaming revenue to grow by 6% next year, listing Sands China as its top pick

Citi published a research report stating that with a wealth of concert activities, luxurious new hotel supply, and new baccarat side bet options, Macau is expected to continue being the preferred travel destination for wealthy mainland tourists. The current forecast predicts that Macau's gaming revenue will grow by 6% year-on-year next year, with industry EBITDA expected to increase by 10% year-on-year, and the EBITDA profit margin maintaining at around 29%, roughly flat year-on-year.

The bank lists Sands China (01928.HK) as the industry favorite, noting that Sands is expected to become the largest market share winner by 2026, with its share potentially increasing by 1.6 percentage points to 25.1%. The target price has been raised from HKD 25.5 to HKD 26.5. Additionally, Citi believes that with the expansion of the Chairman's Club in the Wynn Palace VIP gaming area set to open in the first quarter of next year, Wynn Macau (01128.HK) is expected to quickly start recovering its market share, and it is listed as the top pick among mid-cap gaming stocks, with the target price raised from HKD 7.2 to HKD 8.05.

Citi reminds that the 2026 FIFA World Cup will take place from June to July next year, which may lead to a year-on-year decline in Macau's gaming revenue. It forecasts that gaming revenue in June and July will decrease by 10% and 5% year-on-year, respectively, to approximately MOP 19 billion and MOP 21 billion, with gaming revenue expected to resume growth after the event.

The bank's preferences for other gaming stocks are as follows: Galaxy Entertainment (00027.HK), MGM China (02282.HK), Melco Resorts & Entertainment (MLCO.US), and SJM Holdings (00880.HK), with target prices of HKD 54, HKD 20, USD 13, and HKD 2.3, respectively. Additionally, Citi maintains Las Vegas Sands Corporation (LVS.US) as the top pick among global gaming stocks, with the target price raised from USD 75.5 to USD 76.75, optimistic about the improvement in Singapore's business and the recovery of Macau's operations