Despite “record-high total board emolument” in aggregate at Macau’s six casino concessionaires in 2024, sector “earnings, market capitalisation and cash returned to shareholders in 2024 were still below 2019’s” level, according to a recent report from brokerage CLSA Ltd, suggesting there was “some work to be done” by Macau operators in terms of their “stewardship for shareholders” and their interests.
The institution said the sector returned just under US$1.15-billion of cash to shareholders in calendar year 2024, “64 percent below 2019’s level”.
“We see room for improvement in stewardship for shareholders among Macau gaming concessionaires, though some are doing a better job than others,” wrote analyst Jeffrey Kiang.
He stated: “Directionally, only Galaxy [Entertainment Group Ltd] and MGM China [Holdings Ltd] have their board emolument moving in line with dividends paid to shareholders using years 2024 and 2019 as comparisons.”
Mr Kiang added, citing CLSA research and operators’ annual reports, and referring to market-wide among Macau operators: “Broadly speaking, their total board emolument reached a record high in 2024 at US$119.2 million, or US$63.5 million excluding share options.”
Total board emolument in 2024 represented a 15 percent rise on the pre-pandemic levels of 2019, stated the CLSA report.
That was against a backdrop where the Macau operators’ “aggregate earnings attributable to shareholders and year-end market capitalisation in 2024 were 40 percent and 50 percent” respectively, “below 2019’s level”.
The brokerage noted: “In addition, the cash returned to shareholders – mostly through dividends – in 2024 was also 64 percent below 2019’s level, excluding Melco and SJM [Holdings Ltd], which have yet to reinstate dividends.”
The report uses Melco International Development Ltd, the Hong Kong-listed parent of Macau operator Melco Resorts & Entertainment Ltd, as the measure for the Melco brand’s performance in board payments and the return of cash to shareholders.
Nonetheless said the report, in Macau market-wide, “as a percentage of market capitalisation, the aggregate board emolument has grown from 1.72 percent in 2011 to 5.45 percent in 2024”.
Market capitalisation of Macau gaming names has moderated downward in recent years from a peak in 2013, indicate information from CLSA and Datastream, a global financial database, and which is cited in the report.
CLSA said that among the six Macau operators, “only” Galaxy, SJM Holdings and Melco International “recorded lower board compensation in 2024 versus 2019, partially aided by retirement of certain directors”.
The report also addressed the issue of Macau gaming operators creating value for their shareholders by buying back stock.
The institution stated: “Insiders’ purchases are powerful in our view but lacking for some concessionaires.”
The report indicated that since the second half of 2017, insiders in Melco International and Sands China [Ltd] had been net buyers of shares in the open market, spending an aggregate of US$98 million.
Sands China’s United States-based parent Las Vegas Sands Corp had purchased the Macau unit’s stock in 2023 and 2024, “but only part of such purchases were in the open market,” said the CLSA analyst.
Mr Kiang observed: “On the contrary, insiders in SJM, Galaxy, MGM China and Wynn Macau [Ltd] have sold shares (net) since second-half 2017, for an aggregate amount of US$111 million.”
He added: “From the ‘principal-agent’ perspective, in which the boards of directors act as ‘agents’ for shareholders, we see room for improving stewardship for Macau gaming concessionaires.”
