CICC: Downgrades Macau gaming industry rating and 20262027 earnings forecasts; industry recovery may be further delayed.

CICC released a research report stating that it remains cautious on the fundamentals of the Macau gaming industry, downgrading the industry rating and lowering its 2026 and 2027 earnings forecasts for the industry. The bank has not yet seen a clear inflection point at the level of gross gaming revenue (GGR) and profitability in the short term. The bank believes that without substantive new supply, policy adjustments, or other demand-side catalysts, the industry recovery may be further delayed. CICC's main views are as follows: The bank believes that market consensus has not yet fully reflected the impact of weak demand. After this earnings forecast cut, the bank expects industry EBITDA to decline 5% and 9% year-on-year in 2026 and 2027. However, Visible Alpha consensus still expects the industry to maintain positive year-on-year growth (forecasting EBITDA to grow 0% and 7% year-on-year in 2026 and 2027). The bank believes the market has underestimated the extent of demand-side weakness, and there remains room for downward revision in consensus estimates. Content repetition and competition from Kai Tak have reduced Macau's event appeal. The bank believes that Macau's entertainment offerings have become less attractive to incremental tourists, due to: 1) relatively repetitive entertainment content over the past four years; 2) intensifying competition from Hong Kong's Kai Tak venue, whose 50,000-seat arena can host more heavyweight international events, potentially diverting Macau's high-end entertainment resources and reducing the appeal of Macau's entertainment events to visitor traffic. High-end demand is weakening, with recovery driven by same-day round-trip visitors with lower spending capacity, while overseas visitor growth has peaked. During the 2026 National Day Golden Week, visitor arrivals to Macau rose 9% year-on-year, but the bank expects comparable GGR to decline 5% year-on-year, indicating weak per-capita spending capacity. Meanwhile, affected by the global stock market downturn, overseas visitors have also gradually peaked since May 2026, shifting from previous double-digit growth to single-digit declines. The company expects Galaxy Phase 4 to be delayed until early 2028, leaving the industry lacking growth highlights in 2027. The opening timeline for Galaxy Phase 4 is later than the bank expected, leaving the industry without a key catalyst in 2027 and resulting in limited drivers available to stimulate industry demand in the short term. The bank expects the industry's valuation recovery cycle to be longer than expected, as it requires evidence that demand growth is not driven by ordinary seasonal fluctuations or exchange rate movements. Risk reminders Gaming demand and liquidity recovery may be faster than expected; new property openings may be earlier than expected, and ramp-up of renovated properties may be better than expected.