GGRAsia – Brokerages up 1Q EBITDA estimates for Macau names

Brokerages up 1Q EBITDA estimates for Macau names

Apr 12, 2023 Newsdesk Latest News, Macau, Top of the deck

Two brokerages have upped their performance forecasts for a number of Macau casino operators regarding first-quarter earnings before interest, taxation, depreciation and amortisation (EBITDA).

In a Tuesday note, John DeCree and Max Marsh, of CBRE Securities LLC, specified such adjustment for the three Macau names the brokerage covers: Sands China Ltd; MGM China Holdings Ltd, and Wynn Macau Ltd.

CBRE now expects their combined first-quarter EBITDA to reach US$480.9 million, up 11.6 percent on its previous estimate of US$430.8 million.

“The recovery continues to move in the right direction at a slightly faster than expected pace,” said the brokerage.

On April 1, the Macau government reported that first-quarter casino gross gaming revenue (GGR) was MOP34.64 billion (US$4.28 billion), up 94.9 percent on the prior-year’s quarter.

CBRE nonetheless noted: “We still see a few bottlenecks to a broader mass market recovery that should abate over time, including a lack of labour, namely foreign workers that left during the pandemic, and visa issuance in mainland China, including for package tours which only resumed in recent weeks.”

JP Morgan Securities LLC stated in a Tuesday note focusing on MGM Resorts International, the majority owner of MGM China, that for the latter, the institution was upping its forecast on a number of performance indicators.

For MGM China, “our first-quarter Macau net revenue, property-level EBITDA and EBITDA margin forecasts are now US$407 million, US$63 million, and 15.5 percent respectively, up from US$321 million, US$40 million, and 12.5 percent previously”.

The note by Joe Greff, Omer Sander, and Ryan Lambert added regarding MGM China: “Our estimates are now based on mass table and slots GGR resembling 65 percent of 2019 levels and VIP at 20 percent of pre-Covid levels.”

MGM China runs MGM Macau on the city’s peninsula, and MGM Cotai in the newer casino district.

JP Morgan estimated that for each month in the first quarter, MGM China’s performance had “improved meaningfully sequentially, and non-gaming revenues also saw similar strength”.

For the second quarter, the institution forecasts MGM China’s revenues, EBITDA and margins at US$452 million, US$72 million, and 15.9 percent, respectively.

This was based on “just a slight improvement in mass GGR, to 70 percent of 2019 levels,” stated JP Morgan.

“We see mass GGR recovering to 85 percent of 2019 in the fourth quarter 2023, and 95 percent of 2019 levels in 2024,” added the brokerage.

In Macau-market commentary before Easter, Morgan Stanley Asia Ltd had observed that the Macau operator post-pandemic labour crunch was already “well understood by investors”.

Analysts Praveen Choudhary and Gareth Leung stated: “Companies have been adding non-gaming employees at a steady pace, but may not be able to keep all [hotel] rooms open for the entire month of April or May.”

They added that the labour market had been “stretched” amid up to three accommodation-facility openings in the second and third quarters this year: a Raffles hotel at Galaxy Macau; the Epic Tower and the W Macau at Studio City; and Versace-branded accommodation at Grand Lisboa Palace.

“Currently, it takes around 30 days to get approval and to onboard an overseas employee,” stated Morgan Stanley.

Referring to the upcoming holiday period surrounding Labour Day on May 1, a public holiday in mainland China, the analysts added: “More importantly, companies will be able to open the majority of the rooms during May holiday week/weekend with the help of existing staff working overtime, as was the case during Chinese New Year in January.”