Any impact on consumer demand for Macau tourism and gambling stemming from the United States-China trade tariff row, might come as a result of “a ripple effect on more cost-conscious travellers/casino-goers,” says CreditSights Inc. in a Thursday memo.
But the financial research firm added: “At this juncture, we think there is limited impact to the Macau gaming sector at the fundamental level as we still expect China’s 2025 GDP [gross domestic product] growth at 4.7 percent,” above market consensus of 4.5 percent.
“Fundamentally, the Macau gaming sector is largely domestic focused as the bulk of visitors into Macau come primarily from mainland China,” noted CreditSights analysts Nicholas Chen and David Bussey in their memo.
Their sanguine view on the outlook for Macau was maintained “after factoring in the tariff implications and trade uncertainties”.
Nonetheless, the institution acknowledged “downside risk to our 4.7 percent 2025 GDP forecast has increased due to a global growth slowdown”.
On Thursday, U.S. President Donald Trump raised to a minimum of 145 percent, the U.S. tariff on imports from China. The same day, Beijing raised its own tariffs on U.S. goods to 84 percent.
In relation to bonds issued by Macau casino operators, CreditSights noted instances of a widening on “spreads”; typically defined as the difference between the yields of two bonds with the same maturity but different credit quality.
“The widening continued this week – from last Friday’s close to April 9 – with Sands China [Ltd] widening by another 76 to 137 basis points while the high-yield credits widened by another 110 to 258 basis points (excluding the maturing 2025s) as global trade tensions escalated following Trump’s additional tariffs on Chinese imports,” the analysts wrote.
They added: “We also caution that the Macau bonds are likely to experience more bouts of tariff headline-driven volatility in the near-term, particularly those pertaining to China.”
Higher top line in 2025, but also higher capex
For 2025, CreditSights expected “higher top line” performance for most of the Macau casino operators, reflecting the “moderate” year-on-year growth in city-wide gross gaming revenue (GGR), coupled with “steady operator-level market share and non-gaming contributions from facilities coming online in 2025”.
CreditSights added: “We expect gaming market share for Sands China, MGM China [Holdings Ltd] and Melco [Resorts & Entertainment Ltd] to remain steady after a marginal improvement in fiscal year 2024.
This would reflect “opening/reopenings of both gaming and non-gaming facilities – i.e., The Londoner [Macao], upgraded… Cotai Arena,” at the Venetian Macao, and “additional hotel units at MGM China’s two casinos,” as well as a return of the House of Dancing Water show at Melco Resorts’ City of Dreams Macau property, suggested the analysts.
CreditSights further noted: “Considering the 6 percent year-on-year growth in total GGR expected by the Macau government for 2025, as well as additional revenue contribution from [operators’] non-gaming businesses… we anticipate mid-to-high single-digit year-on-year increases in total revenues for these.. [issuers] in fiscal year 2025.”
On April 1, Macau’s Secretary for Economy and Finance, Tai Kin Ip, expressed caution on the outlook this year for the city’s public finances. He said casino gross gaming revenue (GGR) might fall short of the government’s original MOP240-billion (US$30.0-billion) target.
CreditSights said it expected the Macau gaming operators’ free cash flow (FCF) positions to remain positive in the current year.
The Macau gaming operators had given the market guidance they expected higher capital expenditure commitments judged year-on-year in 2025, relating to the concession commitments to the city’s government, said CreditSights.
That amounted to a 68 percent increase for MGM China, 70 percent for Melco Resorts, and 109 percent year-on-year for Wynn Macau Ltd.
This was expected to offset the positive effects of improving earnings before interest, taxation, depreciation and amortisation (EBITDA) in the case of MGM China and Melco, and “crimp their free cash flow positions in 2025, though we still forecast them to remain in the green,” the analysts wrote.
By contrast, Sands China had given guidance it expected 25 percent lower capital expenditure in 2025. “Coupled with its higher expected EBITDA, we expect Sands China’s free cash flow position to improve further in fiscal year 2025,” the CreditSights team further noted.
