Jingwu Financial News | CITIC SEC stated that the December Political Bureau meeting clarified the direction to boost consumption, considering that the core momentum for Chinese consumers' spending on high-end Commodities/Services comes more from the wealth effect. Therefore, based on the assumption that Real Estate will gradually stabilize after a decline, the firm expects a rebound in consumption growth in first-tier cities. In a horizontal comparison, the firm is Bullish on Macau, which, on the occasion of its 25th anniversary of return, gambling as a 'cyclical + high-end Consumer' category, may become a leading indicator of domestic demand recovery. From an Industry perspective, the cumulative GGR data for January to November 2024 has restored to 77% of the same period in 2019, exceeding the annual expectations. Additionally, benefiting from changes in income structure and cost control, the profitability of current gambling operators is recovering well, with the industry-adjusted EBITDA for Q3 2024 recovering to 84% of the same period in 2019.
Looking ahead, the firm believes that with the end of the Spring Festival peak season, industry competition will remain high but generally stabilize. Under the comprehensive stimulation of domestic demand policies, the prosperity of the Macau gambling Sector is expected to further improve. From a valuation perspective, after the recent economic, signing, holiday, and other multiple Bullish policies prompted a rise in stock prices, the current overall EV/EBITDA valuation of the Macau gambling Industry has risen to 9x but is still below the historical average valuation center by 1-2 standard deviations. In conclusion, it is recommended to select short-term high-profit realization stocks.
