GGRAsia – Galaxy to gain market share, MGM China to slip: analyst

Galaxy to gain market share, MGM China to slip: analyst

Apr 15, 2024 Newsdesk Latest News, Macau, Top of the deck

Seaport Research Partners – a division of Seaport Global Securities Inc – has initiated coverage on Macau’s six casino operators, as well as the United States-based parents of three of them, namely Las Vegas Sands Corp; MGM Resorts International; and Wynn Resorts Ltd.

The brokerage’s 109-page report starting coverage was issued on Sunday, by veteran analyst for the sector, Vitaly Umansky.

“We expect Macau to deliver strong results in 2024 and into 2025, while the U.S. industry will potentially see some headwinds that could limit growth relative to last year,” wrote Mr Umansky.

“The Macau gaming industry generated US$23 billion in gross gaming revenue (GGR) and US$4 billion in non-gaming revenue in 2023, with GGR forecasted to rise to over US$28 billion and non-gaming to US$5 billion in 2024,” he added.

The institution thinks MGM China Holdings Ltd might cede some of the recent progress it has made in GGR market share, as other Macau operators catch up on the use of so-called ‘smart’ gaming tables.

Seaport expects that for 2024 as a whole, and into 2025, Galaxy Entertainment Group Ltd will gain share in terms of Macau’s GGR.

For the first quarter of this year, Galaxy Entertainment had been flagged in a Citigroup note last week as likely to have lost 0.8 of a percentage point of market share.

Mr Umansky said regarding Seaport’s take on Galaxy Entertainment: “We forecast GGR market share to rise from 17.9 percent in 2023 to 19.3 percent in 2025.”

This was “largely due to ramp up of Galaxy Macau and recovery in base mass”. Galaxy Macau is the group’s flagship resort in the city’s Cotai district.

Seaport referred to an ongoing narrative in the industry regarding potential operational efficiencies – in terms of knowing customers’ play habits and creating operational efficiencies – from so-called ‘smart’ gaming tables.

Mr Umansky noted: “Galaxy [Entertainment] has also been aggressively pursuing acquiring smart digital tables which should be fully online by early next year,” with some tables “coming online later this year.”

“The critical drivers for Galaxy over the next one to two years will be to take premium gaming market share while growing with the base mass recovery,” he added. The company would also benefit from the opening of Phase 4 of Galaxy Macau, which would “significantly increase capacity”.

The operator had previously “lost share largely due to the decline in VIP, where it was the largest operator,” stated the brokerage.

MGM China tech lead to moderate

MGM China Holdings had recently been “the largest share gainer with overall GGR share rising from 9.5 percent in 2019 to 15.3 percent in 2023, while mass share rose from 9.9 percent to 15 percent,” according to Seaport’s report.

But Mr Umansky stated: “We forecast MGM [China] to lose share as other newer properties ramp up, base mass visitation increases, and other operators incorporate smart table technology, where currently MGM has a head start.”

Sands China Ltd has been leading the Macau market in GGR and earnings before interest, taxation, depreciation and amortisation (EBITDA) “due to its scale,” said Seaport.

But during this year, Sands China would in likelihood “temporarily lose some share due to ongoing redevelopment of The Londoner [Macao]” resort in Cotai, “but by 2025, we expect [Sands China's] GGR share to rise to 27 percent, compared to 24 percent in 2019, as The Londoner is fully optimised and base mass recovery accelerates,” wrote Mr Umansky.

Melco Resorts & Entertainment Ltd had “struggled” in the post-pandemic period, which had “led to the termination” of its former chief operating officer for Macau resorts, and “new senior management being brought in”.

Seaport stated: “Melco lost approximately 180 basis points of GGR share since 2019. We forecast it to lose some additional share over the next two years, but strategic changes at City of Dreams and Studio City could surprise on the upside.”

Wynn Macau Ltd had also lost post-pandemic share, “dropping to 14.8 percent in 2019, to 13.5 percent in 2023”.

Mr Umansky stated the company had “focused on shifting business away from the decimated VIP business, where it was a strong competitor, to additional capture of the premium mass business.”

Though he added: “We expect some share loss as Wynn has no product offering… to attract base mass,” at a time that other operators have been increasing “competitiveness around premium mass”.

SJM Holdings Ltd “continues to struggle in a competitive Macau,” suggested Mr Umansky.

“Overall market share has dropped from 15 percent in 2018 to 12 percent in 2023,” he added. “This has partly been due to the closure of many of its satellite casinos. The company has become the second smallest operator in terms of GGR and remains the smallest operator in terms of EBITDA.”

Seaport further noted: “The key focus on SJM is for it to hastily improve the ramp up of its new Cotai property – Grand Lisboa Palace.

“However, we do not forecast a rapid turnaround story for SJM as it will continue to struggle on Cotai as other operators enhance their product and marketing.”