Morgan Stanley: The outlook for Macau gaming stocks has weakened, and target prices have been comprehensively lowered. Galaxy Entertainment and WYNN MACAU have been downgraded to "in line with the market."

Morgan Stanley published a report, expecting that Macau gaming stocks will underperform the market in the short term, forecasting a 6% growth in Macau gaming revenue this year, with EBITDA only increasing by 2%, which is below market expectations and weaker year-on-year. Due to the base effect impacting gaming revenue in the second half of the year, growth will slow down, and the basic mid-market remains weak. Additionally, the level of promotional offers in the industry has increased, along with ongoing non-gaming expenditures. As the focus is on the high-end mid-market, cost pressures (especially reinvestment) are structural. The downward revision of market earnings estimates will put pressure on this year's EBITDA forecasts.

The bank downgraded its industry outlook from "attractive" to "in line with expectations," anticipating that gaming revenue will slow down year-on-year starting in May, with negative EBITDA growth expected in the second and third quarters. In terms of stocks, the bank prefers Sands China (01928.HK) and Melco Resorts & Entertainment (MLCO.US).

At the same time, the bank has lowered target prices for Macau gaming stocks across the board and downgraded Galaxy Entertainment (00027.HK) and Wynn Macau (01128.HK) to "in line with the market," detailed as follows:

Stock | Rating | Target Price (HKD)

Sands China (01928.HK) | Overweight | 22 -> 18.5

Galaxy Entertainment (00027.HK) | Overweight -> In line with the market | 44 -> 39

MGM China (02282.HK) | In line with the market | 15 -> 13.2

Melco Resorts & Entertainment (MLCO.US) | Overweight | 8.5 -> 6.3

Wynn Macau (01128.HK) | Overweight -> In line with the market | 6.6 -> 5.9

SJM Holdings (00880.HK) | Reduce | 2.2 -> 2