GGRAsia – Macau 1Q to top US$1bln EBITDA, a first since 2019: analysts

Macau 1Q to top US$1bln EBITDA, a first since 2019: analysts

Apr 18, 2023 Newsdesk Latest News, Macau, Top of the deck

Several brokerages estimate that the Macau casino industry burst through the US$1-billion barrier in the first quarter, in terms of collective earnings before interest, taxation, depreciation and amortisation (EBITDA), which one says is a record since the Covid-19 pandemic began in early 2020.

“On our estimates, Macau as a whole more than broke even during the quarter, having generated industry EBITDA of US$1.038 billion,” stated analysts George Choi and Ryan Cheung, of Citigroup Global Markets Inc, in a Sunday note.

DS Kim and Mufan Shi, of JP Morgan Securities (Asia Pacific) Ltd, wrote in a Saturday memo looking ahead to Macau’s first-quarter earnings season: “We estimate the six operators collectively can print US$1 billion-plus in EBITDA for the first time in three-plus years despite being in the (very) early innings of a recovery cycle.”

Macau’s casino gross gaming revenue (GGR) was just over MOP34.64 billion (US$4.28 billion) for the first three months of the year, up 94.9 percent on the prior-year’s quarter.

The JP Morgan analysts stated they expected MGM China Holdings Ltd, which runs MGM Macau and MGM Cotai (pictured), to “deliver stand-out performance” in the first quarter.

“We estimate that MGM [China] will generate near-record mass/slot GGR in first quarter 2023 – approximately 110 percent of first quarter 2019 versus the industry’s 65 percent recovery – driving its EBITDA to recover to 75 percent-plus of pre-Covid-19 levels, versus the industry’s 40 percent-plus levels,” they said.

JP Morgan suggested reasons for MGM China gaining up to 7 percentage points, i.e., to 16 percent, of mass share relative to pre-pandemic trading, were its “outsized exposure” to the mass segment.

The brokerage also said “most” of the hotel rooms at its two properties were in use, compared to “15 percent to 25 percent capacity reduction for peers amid the labour shortage”. Also, the management had made a made operational changes during the pandemic, including “changing table layouts, upgrading lighting…. fine-tuning rewards programmes,” and that the adjustments “seem to have been received very well by premium players”.

MGM China was also Citigroup’s pick for best performer recovery-wise in the first quarter.

Both brokerages also suggested SJM Holdings Ltd would be the recovery laggard in the first quarter.

Citigroup stated: “SJM will likely be the only operator remaining in the negative EBITDA territory,” albeit on a sequentially-narrowed EBITDA loss.

It forecasts SJM Holdings’ EBITDA loss at US$35 million for the first quarter, compared to an EBITDA loss of US$123 million in the fourth quarter last year.

The Macau industry as a whole experienced a number of quarters of mostly negative EBITDA. Such losses were prior to the relaxation in early January of Covid-19 countermeasures in the key tourism source markets of mainland China and Hong Kong, as well as in Macau itself.

Nonetheless some commentators had previously mentioned that operators have managed to run leaner on costs since the stop-start trading experienced during the pandemic, meaning that when recovery started, the structure of costs did not return to pre-pandemic format.