Macau's gross gaming revenue for May increased by 7% year-over-year to MOP 22.6 billion, equating to a daily average of MOP 729 million. This result surpassed market expectations of 5% growth to MOP 22.3 billion.

Despite the better-than-expected May data, the market is expected to face challenges in the near term. Comparisons will become more difficult due to a higher base from the previous year. Furthermore, the FIFA World Cup, scheduled from June 11 to July 19, may temporarily divert the time and funds of premium players, potentially putting pressure on gaming data for the next two months.

Forecasts for June and July gross gaming revenue remain unchanged, anticipating stable figures with year-over-year changes within a range of plus or minus 2%. For the remainder of the year, low single-digit growth is expected, with the exception of September, which will benefit from a low base due to a severe typhoon in the same period last year.

It is believed that the market has already priced in the anticipated growth slowdown, leaving limited room for further valuation declines. The industry outlook is expected to become clearer around August to September, when the comparison base becomes relatively lower. Additionally, some operators, such as Galaxy Entertainment, may increase their dividends during the interim results period.

Investment Strategy and Preferences

The maintained investment stance for the Macau gaming sector is "neutral/selective," advising against chasing momentum but also not overlooking the sector's low valuations and solid shareholder returns.

GALAXY ENT (HKEX: 00027)

The top sector pick remains Galaxy Entertainment, rated "Overweight," primarily due to optimism surrounding the opening of its Phase 4 project next year.

High-yield stocks with attractive dividend rates are also favored. This includes Wynn Macau and Sands China, both rated "Overweight," with dividend yields exceeding 8% and 6%, respectively.

The overall preference ranking for the sector is unchanged: Galaxy Entertainment is the top choice, followed by Sands China and Wynn Macau in equal preference. Next are MGM China and Melco Resorts & Entertainment, followed by Melco International Development, with SJM Holdings at the bottom of the list.