Year-on-year growth in Macau casino sector earnings before interest, taxation, depreciation and amortisation (EBITDA) is likely to have slowed to 16 percent in the third quarter, compared to 28 percent expansion in the second quarter, says banking group Morgan Stanley.
Citing industry unofficial returns, and commenting on the outlook for the fourth quarter, the institution stated: “Our concerns include slowing mass growth (single digits for Golden Week), risk of premium mass, and macro slowdown in China… Together with base effect, these suggest continued deceleration in year-on-year growth.”
Those were references to an eight-day holiday in China from October 1 to October 8, and the higher base in the third quarter 2016 due to the opening in that period respectively of Wynn Palace, a Cotai property promoted by Wynn Macau Ltd, and the Parisian Macao, promoted by Sands China Ltd.
“Without any new casino opening in fourth quarter 2017, the growth rate could slow further; fourth quarter 2016 had full-quarter impact from Parisian [Macao] and Wynn Palace,” wrote analysts Praveen Choudhary, Alex Poon and Thomas Allen in their Wednesday note, previewing third quarter earnings season for Macau’s casino operators, that is due to begin shortly.
It had been expected by the market that MGM Cotai, promoted by MGM China Holdings Ltd, would launch in the fourth quarter this year. But late last month the firm said it had delayed the opening to January 29, 2018. It cited as a factor damage to the site caused by Typhoon Hato, which struck the city on August 23.
Morgan Stanley said it had “not considered” damage from Typhoon Hato in its third-quarter assessment. “We believe [damage] would be partly covered by insurance, and investors should look beyond that event,” stated the analysts.
The institution suggested that Wynn Macau Ltd was likely to post the highest third-quarter EBITDA growth, of circa 11 percent, “mainly driven” by Wynn Palace.
It added that Sands China and Galaxy Entertainment Group Ltd were likely to post quarterly EBITDA year-on-year gains “similar to the market’s”, but noted Sands China had benefited from “renovation of the Venetian [Macao] and Four Seasons [Macao].”
Regarding MGM China, which currently operates a single property – MGM Macau, in the city’s traditional downtown gaming district – Morgan Stanley said: “We expect lost mass market share, especially in the premium segment, resulting in flattish to down quarter-on-quarter EBITDA.”
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"We believe the better-than-expected November gross gaming revenue number [in Macau] positions MGM [China Holdings Ltd] especially well for a strong opening in Cotai”
Japanese brokerage Nomura