Banking group Morgan Stanley says it expects mass-market revenue in Macau’s gaming industry to reach about US$3.4 billion in the first quarter this year, up circa 200 percent quarter-on-quarter. Such figure would represent about 63 percent of first-quarter 2019 mass revenue, a period before the onset of the Covid-19 pandemic in early 2020, stated the institution.
Morgan Stanley said visitor arrivals to Macau in the first three months of the year might be up by about 240 percent sequentially, to circa 50,000 per day. Macau cancelled with effect from January 8 most of its travel restrictions related to the pandemic. The city recorded nearly 1.40 million visitor arrivals in January, up 259.0 percent month-on-month, according to official data.
“At this level of mass revenue, the industry should be making positive” earnings before interest, taxation, depreciation and amortisation (EBITDA) and free cash flow to equity (FCFE), wrote analysts Praveen Choudhary, Gareth Leung, and Stephen Grambling, in a Tuesday memo.
The Morgan Stanley team said it expected MGM China Holdings Ltd and Wynn Macau Ltd to be mass-market share gainers in the three months to March 31.
“We think MGM China will be helped by its 200 more [gaming] tables from 2023 (plus 40 percent versus 2019), while Wynn Macau reported two-month 2023 gross gaming revenue market share at 15 percent (13 percent in fourth quarter 2022, 16 percent in first-quarter 2019),” stated the analysts.
The investment bank said in the note that “better mass-market share translates into better EBITDA recovery” in the opening quarter of 2023.
It said it expected MGM China and Wynn Macau Ltd property EBITDA at HKD760 million (US$96.8 million) and US$148 million, respectively. “MGM operational expenditure could be much higher” than its Macau peers, it added.
The Morgan Stanley report also suggested that Galaxy Entertainment Group Ltd would likely “have the highest EBITDA recovery rate, at 50 percent of first-quarter 2019,” at HKD2.0 billion, enabled by “its better cost controls and non-gaming segments”.
The analysts also said they expect most Macau operators to be generating positive FCFE in the first quarter of 2023, with the exceptions of Melco Resorts & Entertainment Ltd and SJM Holdings Ltd.
Melco Resorts faces “high interest expenses and maintenance capital expenditure”, while SJM Holdings’ Grand Lisboa Palace casino resort “remains EBITDA negative”.
The investment bank now estimates corporate EBITDA among Macau operators of nearly US$6.10 billion in full-year 2023, versus a previous forecast of US$5.92 billion. In 2022, the six operators reported a combined EBTIDA loss of US$1.40 billion, according to Morgan Stanley.
Deutsche Bank Securities Inc has recently upped its estimate for Macau’s 2023 casino GGR to just over US$20.6 billion, post release of February official data. Macau’s February GGR fell by 10.8 percent month-on-month, to MOP10.32 billion (US$1.28 billion) but was up 33.1 percent year-on-year.
