Impact of NBA Events and Investor Focus
Lyon Securities analysts Jeffrey Kiang and Leo Pan pointed out in the investment memo that the NBA China Game hosted by Sands China at The Venetian Macao in early October will be a key discussion point for investors. The event's brand visibility and tourist traffic may affect industry sentiment and company competitive positions.
Analysts indicate that the market will focus on whether the visitor traffic driven by the event can translate into stronger gambling revenue in the weeks following the event, similar to the post-holiday momentum seen after the Golden Week and Lunar New Year.
Recent Performance and Adjustments of Sands China
Sands China admitted that its performance in the second quarter of 2025 was poor, with EBITDA at $566 million, below the company's annual target of $2.7 billion. Rob Goldstein, chairman of Las Vegas Sands Group, candidly stated that the company was "not aggressive enough" in customer reinvestment and began implementing a more aggressive plan from the end of April.
The memo notes that the trends in rebates and reinvestments in the third quarter will be a focus, reflecting Sands China's progress in catching up on player reinvestment.
Quarterly Industry Forecast and Growth Drivers
Lyon Securities forecasts that Macau's gambling industry EBITDA will grow by 10% year-over-year to $2.06 billion in the third quarter, with total gambling revenue increasing by 12.5% to 62.6 billion Macau patacas. The growth is mainly due to strong visitor numbers in July and August and a 2.3 percentage point increase in occupancy rates at five-star hotels.
Analysts expect that if holiday demand continues, the industry's total gambling revenue will maintain growth momentum in October, with overall EBITDA increasing by 2% month-over-month.
Risk Factors and Margin Pressure
The report warns that typhoon disruptions (including the closure of casinos for 33 hours during Typhoon "Ragasa") may put pressure on profit margins. Lyon Securities expects the EBITDA margin to decrease by 0.5 percentage points month-over-month, partly due to rising wage costs and increased marketing expenses.
The sustainability of total gambling revenue after the Golden Week and the effectiveness of player reinvestment will be key observation indicators.
Medium and Long-term Outlook and Forecast Adjustments
Lyon Securities has raised its total industry gambling revenue forecast for 2026 and 2027 by 1.3% and 1.2%, respectively, due to the continued appreciation of the RMB and improvements in mainland China's industry profitability indicators. The brokerage expects Macau's annual gambling revenue to reach 273 billion Macau patacas ($33.9 billion) by 2027, approximately 93% of the 2019 level.
Driven by the recovery of the mass market and growth in non-gambling revenue, it is expected that all operators' EBITDA will grow by 7% year-over-year in 2025 and by 8% in 2026.
Operator Ratings and Investment Preferences
Lyon Securities maintains an "outperform" rating for the six major gambling operators, with Galaxy Entertainment and MGM China listed as preferred investment targets. Analysts are optimistic about the overall industry prospects, believing that the continued recovery of the market will drive improvements in the performance of each operator.
Sands China is expected to regain its market share to about 23.3% in the third quarter of 2025, benefiting from its marketing catch-up efforts and higher reinvestment levels.
Dividend Expectations for Sands China
Although short-term profit margins may still face pressure, Lyon Securities expects Sands China's dividend yield to climb to 7.4% by 2027. This expectation is based on the company's business recovery and improved cash flow prospects.
The dividend policy will be one of the focal points for investors, reflecting the company's financial health and shareholder return capabilities.
Market Environment and Competitive Situation
The Macau gambling industry continues to show signs of recovery, with operators intensifying competition in acquiring visitor traffic and player reinvestment. Sands China enhances brand exposure through major events like the NBA, attempting to regain market share in the competition.
The overall competitive landscape remains stable, with operators adopting different strategies in the high-end and mid-field markets to attract customers.
Investor Focus and Market Sentiment
Investors are particularly focused on the actual contribution of the NBA event to Sands China's quarterly performance and the effectiveness of the company's reinvestment strategy. Market sentiment is influenced by both quarterly performance guidance and industry recovery progress.
Lyon Securities advises investors to focus on the sustainability of post-holiday demand and improvements in operational efficiency, which will impact short-term stock performance.
