The increase in the downside risks of the global economy, coupled with the impact of the trade war, placed negative impact on consumer sentiment. Although the retail consumption growth in the Mainland rebounded to 8.6% in May, it was the historical low for the past 19 years, reflecting that consumption is still weak. The decline in consumer sentiment has also indirectly dragged Macau's gaming revenue. The gaming revenue growth rate was decelerating since the beginning of last year and recorded a decline of 8.3% in April this year, but it resumed growth in May and June, up 1.8% and 5.9% respectively. Quarterly, it was down by 0.5% in 2Q2019 year-on-year, remained flat compared to 1Q2019, signaling a sign of no further deterioration. In fact, the sector’s average of enterprise value to 12-month forecast EBITDA ratio (EV/EBITDA) fell below 9 in early June and then rebounded to about 11.4. The current valuation is about 1 standard deviation below its three-year average and has reflected the slowdown in gaming revenue growth, especially in the VIP room business. We expect the sector could outperform in the near-term amid the improved investment climate after the resumption of trade talks between US and China, and the stabilizing gaming revenue growth.
Bloomberg, The Gaming Inspection and Coordination Bureau