Morgan Stanley: Macau's Tax Revenue Outlook Weak, Short-Term Downside Risk for Casino Stocks

Morgan Stanley's research report stated that the Macao 2025 Policy Address showed a weak outlook for tax revenue. The per capita consumption of local residents continues to decline, reflecting soft demand that is difficult to recover in the short term. The gaming industry faces challenges, with a projected 5% year-on-year reduction in EBITDA in the first quarter of 2025, despite a 1% year-on-year increase in total gaming revenue, indicating negative operational leverage and a decrease in profit margins. The bank believes that there is downside risk in Macao gaming stocks in the short term, but within the next 12 months, Sands China (01928) and MGM China (02282) may outperform the broader market due to high dividend yields and normalized valuations, provided that macroeconomic stability and consumer confidence improve.