Next year is likely to be a “transitional year” for the Macau gaming market, says brokerage CBRE Securities LLC, referring to recovery of demand as the city and China as a whole emerge from a ‘zero-Covid’ policy.
But analysts John DeCree and Max Marsh observed that consensus estimates for 2024 implied “substantial recovery” in Macau with net revenue and adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) “forecast to recover to 77 percent and 86 percent of 2019 levels for the market as a whole”.
“This translates to a roughly US$27 billion GGR [gross gaming revenue] market, which would require approximately 40 percent growth in mass table and slot GGR over 2019, assuming VIP is immaterial going forward,” added the analysts. The latter was a reference to an assumption that the Macau operators’ one-time collaboration with third-party VIP gambling junkets – a trade mostly suspended as of December last year – would not for now make a significant comeback.
A US$27-billion annual GGR market would be well over the MOP180-billion (US$22.5-billion) GGR threshold set by the Macau government that would trigger an up to 20 percent increase to the MOP108.7 billion that the newly-reinstalled six Macau operators have already pledged collectively to spend on non-gaming as a condition of their new concessions.
Even were an up-to-20 percent increment to apply in terms of non-gaming spending commitment for the Macau operators, that still “seems manageable and reasonable”, said JP Morgan Securities (Asia Pacific) Ltd in a Monday note.
“The operators may be able to allocate existing operating expenses from non-gaming to new projects,” stated analyst DS Kim. He had already mentioned in a Sunday note that non-gaming should not only generate its own revenue streams, but also could prompt “incremental gaming spend from additional visitors and longer stay”.
In the Monday memo, JP Morgan also gave some commentary on gaming table allocation for the operators under the new concessions due to start on January 1. The figures were mentioned in recent respective stock market filings by the concessionaires.
“We do acknowledge there was a somewhat uneven allocation, in that MGM [China Holdings Ltd], Sands [China Ltd], Galaxy [Entertainment Group Ltd], got more than enough tables versus Wynn [Macau Ltd], Melco [Resorts and Entertainment Ltd], SJM [Holdings Ltd], who received less than expected,” wrote Mr Kim.
This was “seemingly reflecting the ranking of the concession bidding” results, he suggested. But he added: “We do not think the number of tables would matter too much in the ‘new Macau’ post-Covid-19.”
Factors to support that theory included “a lot of excess [table] capacity in the market, given the demise of junkets,” that had “occupied about 20 percent of total tables pre-Covid-19; and the exit of seven satellite casinos,” that “probably ran about 10 percent of total tables pre-Covid-19”, wrote Mr Kim.
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