GGRAsia – Macau 2Q EBITDA likely up 35pct q-o-q, says Citi

Macau 2Q EBITDA likely up 35pct q-o-q, says Citi

Jul 11, 2023 Newsdesk Latest News, Macau, Top of the deck

Brokerage Citigroup says it expects Macau’s casino industry to post earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$1.59 billion for the second quarter, up 35 percent compared to the first three months of 2023.

“Based on the government-reported second quarter 2023 gross gaming revenue (GGR) figure and the solid premium mass trends we gathered from our monthly table survey, we anticipate that Macau continues to steadily recovering its EBITDA in this past quarter,” wrote analysts George Choi and Ryan Cheung in a memo issued on Monday.

They added: “Based on our forecast, industry EBITDA will likely have recovered to approximately 65 percent of second-quarter 2019 level, mainly driven by approximately 90-percent mass GGR recovery.”

Macau’s second-quarter GGR stood at MOP45.49 billion, up 31.3 percent from MOP34.64 billion in the first three months of 2023, according to data released earlier this month by the local regulator, the Gaming Inspection and Coordination Bureau. The latest quarterly result represented 62.0 percent of the MOP73.35-billion achieved in the comparable period of 2019, before the pandemic.

According to Mr Choi and Mr Cheung, “visitors in Macau are still demonstrating some higher-than-pre-Covid-19 spending power, a similar trend that can be found in some global luxury consumption discretionary plays.”

The Citigroup analysts added they expected MGM China Holdings Ltd “to be the first casino operator in Macau to exceed its pre-Covid-19 EBITDA.”

In the opposite direction, the brokerage said it anticipated SJM Holdings Ltd “to fall behind the pack in terms of EBITDA recovery”.

It added: “Although we believe Grand Lisboa Palace [casino resort] has gained market share, we also believe that [SJM Holdings’] satellite casinos and other self-operating casinos are facing market share pressure.”

JP Morgan Securities (Asia Pacific) Ltd said in a memo last week that Macau’s casino operations were likely to have achieved in the second quarter “all-time high” EBITDA margins. The institution estimated that sector-wide EBITDA margin peaked at 26 percent during the period.

The JP Morgan team forecast that the sector’s second-quarter EBITDA were likely to stand at US$1.7 billion, 47 percent more than those recorded in the first three months of the year. The estimate represented 73 percent of the quarterly EBITDA recoded by the sector in the second quarter of 2019, prior to the onset of the Covid-19 pandemic.