Morgan Stanley: Cash flow and dividends of Macau gaming stocks continue to grow, prefer Galaxy Entertainment and Sands China

Morgan Stanley's research report points out that despite external hopes for the spring tail effect of Macau casinos, the performance during the Lunar New Year was moderate, and Morgan Stanley is concerned about the profit pressure brought by promotional activities at various casinos. On a positive note, Macau's gaming revenue performed better than other Chinese consumer stocks, with no artificial intelligence risks; additionally, the continuous growth in cash flow and dividends makes the valuations of gaming stocks attractive.

Morgan Stanley stated that although casino operators emphasize that promotional activities have stabilized, they have previously heard such expressions and lack confidence that industry profit margins have bottomed out. Although the performance in the early part of the Spring Festival holiday was weak, it rebounded in the latter part, and it is expected that the total gaming revenue for this month will record low single-digit growth year-on-year, but a 13% year-on-year growth can still be achieved in the first two months of this year.

However, Morgan Stanley pointed out that while the number of visitors to Macau is growing strongly, per capita consumption is declining, and there is a bottleneck in hotel room supply. The average age of gamblers has been decreasing over time.

Morgan Stanley prefers Galaxy Entertainment (00027.HK) as an industry representative and high-dividend-paying Sands China (01928.HK). Wynn Macau (01128.HK) and Melco Resorts (MLCO.US) are undervalued; SJM Holdings (00880.HK) may experience significant fluctuations in EBITDA in 2026; the following are Morgan Stanley's ratings for Macau gaming stocks:

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