Brokerage JP Morgan Securities (Asia Pacific) Ltd says it is now taking into account a financial model that might see a “10 percent sequential decline” in Macau gross gaming revenue (GGR) by the fourth quarter this year, relative to the first quarter.
The institution stated in a Tuesday report it was only “crafting a bear case” in order to “establish a ‘floor earnings’ baseline”, amid factors including the United States-China trade tariff row.
First-quarter Macau GGR was nearly MOP57.66 billion (US$7.21 billion), up 0.6 percent on the same period in 2024.
Analysts DS Kim and Selina Li noted that while Macau industry GGR had been stable year-to-date, with a 1-percent year-on-year gain and a 2-percent improvement in daily run rate, “mounting macro headwinds compel caution”.
They said: “We now model a 10 percent sequential GGR decline by the fourth quarter 2025, versus the first quarter, translating to an 8 percent year-on-year decline in the fourth quarter,” versus the institution’s previous forecast of a 5-percent gain.
“Historical trends suggest a 10 percentage point reduction in GGR loosely implies a 5 percentage point slowdown in China’s GDP [gross domestic product], hence we believe our cut reflects a reasonable bear-case,” added the analysts.
CreditSights Inc mentioned in a Thursday memo that because Macau mostly served the domestic consumer market of the Chinese mainland, its fortunes were aligned to China’s GDP growth, which was still forecast to be in mid-single digits of percent for this year.
JP Morgan observed in its Tuesday update: “Our revised forecasts signal a circa 10 percent/15 percent downside” to market-consensus regarding Macau earnings before interest, taxation, depreciation and amortisation (EBITDA) for financial years 2025/2026.
That was “mirroring the scale” of the market’s cuts “made over the past nine months that triggered a circa 25 percent correction in Macau stocks”.
The analysts further observed: “The six operators’ market caps [capitalisations] have sunk to levels unseen since the last Macau IPO [initial public offering] in 2011, despite 10 mega IRs [integrated resorts] today in Cotai versus only three then.”
“The situation remains fluid, and we hope our numbers prove overly pessimistic,” added the analysts.
JP Morgan then referred in that context, first to the United States-China trade row, second to Guangdong province next door to Macau, and the main tourism feeder market for the city, and third to China’s currency.
They stated: “While tariffs may not directly impact Macau, we are wary of the second-order impacts, notably a slower economy – given exposure to Guangdong, China’s largest export hub – and a weaker renminbi – recall, chips [at Macau casinos] are denominated in HK dollars.”
Macau’s Secretary for Economy and Finance, Tai Kin Ip, had mentioned at the beginning of April, soon after the March GGR numbers were issued, that the “expected monthly average of MOP20 billion” in GGR was not achieved in the first three months of 2025.
And Macau’s leader, Chief Executive Sam Hou Fai, stated in the government’s Policy Address for Fiscal Year 2025, outlined on Monday, that the public budget might need to be revised for a number of reasons, including the GGR outlook, and some spending commitments still to be factored.
