JP Morgan Securities (Asia Pacific) Ltd says it does not expect Chinese New Year (CNY) business to be “a particularly thesis-changing event” in terms of the performance of the Macau casino sector.
“We model only modest year-on-year growth of low to mid-single-digits” in terms of gross gaming revenue (GGR), stated the brokerage in a Thursday memo. The institution’s analysts DS Kim, Mufan Shi and Selina Li added though that “fundamentals are intact” for the Macau market.
Linda Huang and Howard Suen of Macquarie Equity Research, said in a Monday note, that the institution expected “double-digit growth” year-on-year in Macau GGR “over the Chinese New Year holiday”.
They observed: “According to [a] third-party data provider, Macau saw average daily revenue of MOP628 million [US$78.3 million] last week, down 8 percent week-on-week. There was a possibility added Macquarie, citing its source, of “further slowdown” ahead of the holiday.
Nonetheless JP Morgan observed Macau had in the final three months of 2024 “printed the best GGR in 20 quarters despite a poor macro” environment.
The latter was a reference to the underlying situation for the Chinese economy, with the mainland being the biggest single source of customers for the Macau operators.
JP Morgan added regarding the upcoming traditional annual holiday in China, referring secondly to registered players entitled to complimentary benefits from the operators: “Our checks do indicate near-full booking for holidays – e.g., 99 percent of casino hotels are sold out for peak days – and solid quality for comped players, but this was already the case last year and may not suggest much in terms of year-on-year growth.”
The brokerage’s analysts observed that year-on-year comparisons “are quite tough this year”.
In 2024, the lunar new year, known locally as Chinese New Year, fell on February 10. China’s State Council designates the mainland holiday this time as January 28 to February 4.
JP Morgan stated: “Year-on-year comparisons are quite tough this year throughout January to May, which is why we model industry GGR growth of 4 percent year-on-year for the first half [of 2025] versus 7 percent in the second half.”
In terms of fourth-quarter Macau operator performance, the brokerage expects MGM China Holdings Ltd “to be biggest gainer” in terms of GGR, with an additional 90 basis points of share quarter-on-quarter, to 15.6 percent, which JP Morgan said would “comfortably meet” a “mid-teens” target set by MGM China.
Galaxy Entertainment Group Ltd “should be the close second” in terms of GGR share, with 80 basis points of share gains to reach a post-pandemic “high” of 19.7 percent, “as the company yields up its [Galaxy Macau] Phase 3 hotels and revamped gaming floors”.
JP Morgan added it thought Sands China Ltd was the biggest share donor in the final three months of 2024, down almost 100 basis points quarter-on-quarter, to circa 23.5 percent of GGR, “off a relatively high third-quarter base”.
The institution stated this was “likely due to higher-than-expected disruptions” from The Londoner Macao room renovation, with “100 percent of Sheraton [Macao-branded] rooms… taken offline by year-end”.
“This disruption should abate from lunar new year into May as renovated suites are rolled out in phases,” added JP Morgan.
“We estimate that SJM [Holdings Ltd] also lost circa 30 basis points of share, to 13.6 percent, reversing its big share gains in the third quarter, given normalising VIP luck, etc.”
The brokerage observed that respective GGR market share for Wynn Macau Ltd and Melco Resorts & Entertainment Ltd “appear relatively stable (again) in the fourth quarter.”
(Updated 3.54pm, Jan 16)
