JP Morgan: Macau's February gaming revenue beats expectations, recommends maintaining selectivity. Top pick is GALAXY ENT (00027).

JPMorgan Chase released a research report stating that Macau's total gaming revenue (GGR) in February increased by 4% year-on-year to 20.6 billion Macau dollars. The daily revenue was 7.37 billion Macau dollars, exceeding both the market and the bank's expectations. More importantly, driven by strong demand from high-end customers, the daily revenue in the last week of February reached around 10 billion dollars, compared to the relatively flat performance during the Lunar New Year holiday. However, the bank believes that the lackluster performance during the Lunar New Year holiday was mainly due to timing factors, as this year's Chinese New Year peak was later than in previous years, rather than weak underlying demand. Including the data from February, the year-on-year growth in GGR for the first two months of this year is 14%, recovering to 86% of the pre-epidemic level, in line with the strong growth momentum in the second half of last year. However, the bank believes that the performance of GGR in March will not catalyze the industry's stock prices, as investors' focus has shifted to profit margins and EBITDA growth. Although the bank does see initial signs of improvement on a quarterly basis, it still urges caution. In the industry, the bank is most bullish on GALAXY ENT (00027), with a target price of 52 Hong Kong dollars; followed by Sands China (01928) and MGM CHINA (02282), with target prices of 22 Hong Kong dollars and 18 Hong Kong dollars respectively. WYNN MACAU (01128) has a target price of 8 Hong Kong dollars, and all of the above stocks are rated as "Buy". As for SJM HOLDINGS (00880) and MELCO INT'L DEV (00200), they have a "Sell" rating with target prices of 2 Hong Kong dollars and 3.5 Hong Kong dollars respectively.