Macao gaming stocks are set to close the year at higher equity valuation as the pickup in gaming revenues reinforces sector confidence. Sell-side analysts are forecasting industry momentum to carry into 2026, with Morgan Stanley analysts predicting fourth quarter gross gaming revenues (GGR) of 17 percent to translate to 15 percent growth in earnings before interest, taxes, depreciation, and amortisation (EBITDA) during the three-month period, setting the stage for a possible market re-rating.
Looking ahead, the US investment house expects the low base effect to generate double-digit GGR returns through April before the monthly figures taper off around mid-year on account of the better-than-expected summer. For 2026, analysts are calling for high-single digit GGR readings, nearly twice the rate of the government’s 3.5 percent increase from 2025’s revised budget, where the sell-side’s more upbeat assessment stems from a favourable macro backdrop.
[See more: Preliminary estimates suggest Macao’s gaming revenues may have already beat 2025’s target]
Yuan strength and evolving consumption patterns
According to CLSA research, a stronger RMB has historically served as a reliable harbinger of future gaming revenues, given that visitors from mainland China account for Macao’s largest tourism segment. Gaming operators reporting in Hong Kong dollars have also captured the foreign exchange uplift from the yuan’s appreciation which benefits their earnings.
Continued RMB strength should bode well for gaming valuations. Market strategists see Beijing leaning towards a gradual willingness to let the RMB appreciate to boost the purchasing power of Chinese consumers in US dollar terms after China reported a trade surplus of over a trillion US dollars earlier this month.
With household consumption accounting for approximately 40 percent of China’s nominal GDP, Christopher Woods, equity strategist at Jefferies, argues that by introducing policies that can raise that allocation by five percentage points, an additional trillion dollars worth of spending would enter the general economy, noting that greatest scope for incremental demand lies within the service industries.
Liquidity conditions remain accommodative as stock market rallies in Hong Kong and China have catalysed a wealth effect, channeling premium mass tourists into Macao and driving gaming revenues higher, a point mentioned by the chief executive back in November. Jefferies research finds that these trends have simultaneously emerged for luxury and travel-related goods, where a pickup in sales suggests pockets of less cautious consumers.
These shifts are coinciding as more premium mass players come to Macao during less popular, non-peak times, reducing cyclical demand while also setting up the possibility of revised GGR forecasts should the pattern carry over into 2026.
[See more: Better gaming revenues during non-peak holidays might be linked to overtourism]
Dividend support
In addition to the macro environment, gaming stocks are still trading about a third below their long-term EV/EBITDA market average, offering additional upside if growth momentum is sustained. The sector is supported by rising dividends prospects, with Morgan Stanley forecasting a base case, free cash flow yield between 7.0 and 8.5 percent across the sector.
CLSA estimates the six concessionaires to generate free cash flows of US$4.2 billion next year while paying out an estimated US$2.9 billion in total dividends. This implies a sector payout ratio of 68.1 percent based on free cash flow estimates, up from 50.6 percent this year.
