Brokerage CLSA Ltd has reduced its 2024 estimate for Macau-market casino operator earnings before interest, taxation, depreciation and amortisation (EBITDA) by 1.2 percent, to HKD68.63 billion (US$8.76 billion), from HKD69.45 billion.
This was due to the ongoing “competitive landscape” among the city’s six concessionaires, and was “1.8 percent… below consensus,” said the institution.
“The two biggest working assumptions for our sector EBITDA forecasts are: total rebates and reinvestments” by operators “to represent 19 to 20 percent of Macau’s GGR in 2024 and 2025, and; minimal sequential margin expansion… given the competitive landscape,” wrote analysts Jeffrey Kiang and Leo Pan in a sector-outlook update issued on Monday.
That was a reference first, to the cost of running gambling business for the Macau concessionaires in terms of player retainment and incentivisation.
“We expect the sector’s EBITDA to be 8-percent below 2019’s level in 2024, but to be 1-percent below 2019’s level by 2025,” added the analysts. “We still factor in minimal sequential margin expansion.”
CLSA also observed that Macau operators’ net-debt-to-EBITDA leverage had “improved,” amid the market recovery seen since the easing of Covid-19 travel restrictions in the Macau market in early 2023, but leverage levels were “not yet fully normalised”.
The analysts stated: “In terms of balance sheet strength, our calculated net-debt-to-EBITDA ratio for the entire sector – excluding Galaxy [Entertainment Group Ltd] – reached 4.0x in 2023, with Sands China [Ltd] and MGM China [Holdings Ltd] being the lowest at 3.7x.”
“Wynn Macau [Ltd], which has resumed dividend payment, recorded a net-debt-to-EBITDA ratio of 6.6x in 2023, still meaningfully higher than the pre-Covid level of 2.6x in 2019,” added CLSA.
MGM China also announced recently a final dividend for 2023. Galaxy Entertainment said in February it would pay a special dividend for 2023.
In its Monday update, CLSA said it was raising its 2024 gross gaming revenue (GGR) forecast for Macau. “Our latest projections suggests Macau’s GGR will grow 34 percent year-on-year to US$30.3 billion in 2024, followed by a 5-percent increase to US$31.9 billion in 2025,” stated the institution.
The brokerage added that those GGR estimates were “8 percent and 5 percent above consensus, respectively”.
