A brokerage has cut its forecast for Macau second-half mass gross gaming revenue (GGR) by “3 to 4 percent”, to be 113 percent of the same period in pre-Covid trading, meaning it would be more or less flat relative to the first half this year.
JP Morgan Securities (Asia Pacific) Ltd said its update was against the background of “frustratingly poor macro”. That was understood to be a reference to moderation in consumer demand from Macau’s main feeder market for tourists and gamblers, mainland China.
Brokerage analysts DS Kim, Mufan Shi and Selina Li wrote that for Macau operator Sands China Ltd specifically – which reported its second-quarter earnings on Wednesday along with its parent Las Vegas Sands Corp – they were also making a “sharp 10 percent/30 percent cut in non-game/retail revenues” to their previous forecast.
This was to “reflect deteriorating high-end consumption in China, as shown in big misses and guidance cuts by European luxury names in the last couple of weeks”.
As a result, the brokerage cut Sands China’s full-year 2024 estimate for adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) by 8.4 percent, to just under US$2.34 billion, from US$2.55 billion.
The analysts added that after Sands China’s “second quarter miss” on earnings relative to market expectation, they were reducing the firm’s full-year 2024 and full-year 2025 EBITDA by an overall 10 percent relative to pre- second-quarter result consensus.
The institution suggested that for Sands China there was unlikely to be any positive “inflection” in its performance, until remodelling disruption at the group’s Cotai property The Londoner Macao concludes at year-end.
“It’s still five months away before we are likely to see a Sands-specific positive inflection: i.e., when renovation disruption starts to ease substantially,” wrote the analysts.
They added: “Renovated casino/arena/room products should come back online from December 2024 in phases, so for 2025 we assume EBITDA to improve gradually, hitting circa US$700 million by fourth-quarter 2025.”
U.S.-based Joe Greff, Samuel Nielsen and Ryan Lambert of JP Morgan Securities LLC, suggested that the period after such disruption was likely to mean “laying down a foundation for a nice Londoner [Macao] ramp and what likely drives above peer EBITDA growth in Macau in 2025.”
The U.S. team also noted: “In terms of capital return, we see Las Vegas Sands in steady share repurchase mode in the neighbourhood of US$400 million to US$500 million per quarter, though we’d like to see it at the upper end of the range.”
