J.P. Morgan: Weak Macau gaming demand in line with expectations; top pick GALAXY ENT (00027) with target price of HK$45

J.P. Morgan released a research report stating that weak Macau gaming demand in September is in line with the bank's expectations, and the bank maintains GALAXY ENT (00027) as its top pick in the sector with a target price of HK$45. The bank estimates that Macau's gross gaming revenue (GGR) for the first 20 days of September was MOP12.2 billion, or a daily average of MOP610 million, implying that last week's daily average revenue edged up 5% week-on-week to MOP614 million, partly benefiting from a higher VIP win rate. Month-to-date daily average revenue is 14% lower than August's MOP706 million, broadly in line with past seasonal patterns and implying roughly flat year-on-year growth, slightly below the bank's expectation of low single-digit growth. However, the bank believes the data does not reflect any material change in underlying demand, and continued weak demand is within expectations. In addition, the bank believes investors should take a cautious view of this year's Golden Week data, as holiday timing differences and base effects have a significant impact. The bank expects a modest decline during Golden Week, with October gaming revenue down 2% to 4% year-on-year. Therefore, the bank believes the key to stock selection is not whether the data shows slight negative growth, but whether it indicates stable demand or further deterioration; a decline of more than 5% could weigh on market sentiment, while positive growth could trigger a short-term rebound. The bank noted that the current market focus is not on whether Macau gaming stocks are cheap, but on what factors can drive valuation re-rating. In the absence of catalysts from policy or a clear improvement in demand, the bank remains selective; its top pick in the sector is GALAXY ENT, followed by WYNN MACAU (01128), SANDS CHINA (01928), MGM CHINA (02282), Melco Resorts & Entertainment (US.MLCO), Melco International (00200), and SJM HOLDINGS (00880).