A seasonally weak June for Macau’s casino industry, an expected moderation in the number of inbound visitors and China’s pledged clampdown against the illicit money exchange trade have contributed to CLSA Ltd’s lowering its forecasts for the city’s casino gross gaming revenue (GGR) in 2024 and 2025.
CLSA now expects Macau casino GGR in 2024 to reach MOP232.7 billion (US$28.6 billion), up circa 27 percent year-on-year. In 2025, casino GGR should grow by 3.9 percent from this year, to MOP241.7 billion, said the brokerage in a Monday memo.
“We lower calendar year 2024 and 2025 GGR by 3.0 percent and 5.3 percent as we tweak our visitation and GGR/visitor assumptions factoring in DICJ [Macau casino regulator] reported second-quarter 2024 GGR of MOP56.4 billion, which is 1.6 percent lower than first quarter of 2024, as well as the impact from increasing vigilance against illegal money exchange activity from China,” wrote CLSA’s analysts Jeffrey Kiang and Leo Pan.
The weaker second-quarter Macau GGR was “largely” due to a “seasonally weak June”, a month when the UEFA Euro 2024 had been ongoing, the analysts stated. Macau’s June GGR was just over MOP17.69 billion, the lowest so far this year, and was suggested by a number of investment analysts that the tally could be seen as the ‘floor’ for Macau’s GGR monthly run-rate this year.
The CLSA analysts observed: “Although a soft start to July’s GGR and recent crackdown on illegal money exchange activity have weighed on investor sentiment, stable balance sheets and sensible competition should enable the companies under our coverage [Macau casino operators] to weather these short-term headwinds.”
Along with a lower GGR forecast for 2024 and 2025, CLSA also lowered its forecast for the Macau gaming sector earnings before interest, taxation, depreciation and amortisation (EBITDA) for the two calendar years, due to increased “promotional activity among operators and rising payroll costs”.
CLSA now expects sector adjusted EBITDA of HKD63.3 billion (US$8.1 billion) this year, down 8 percent on its previous estimate. The tally would represent 85 percent of 2019 levels, the immediate trading year before the onset of Covid-19. For 2025, the brokerage has lowered the Macau casino sector EBITDA forecast by 5.8 percent, to about HKD71.7 billion.
“Factoring in [Macau casino operators’] promotional activity and rising payroll costs, we forecast the sector’s EBITDA margin (measured against net revenue) to contract 1.2 percentage points to 30.3 percent in second-quarter 2024,” noted the CLSA analysts.
“We forecast Macau gaming sector EBITDA to decline 5 percent quarter-on-quarter” to about US$1.9 billion, or HKD15 billion, in the three months to June 30, they added.
