Banking group Morgan Stanley expects Macau casino industry earnings before interest, taxation, depreciation and amortisation (EBITDA) to have fallen sequentially in the first quarter, despite an increase in gross gaming revenue (GGR) in the period.
The Macau industry was likely to report in the upcoming earnings season total “corporate EBITDA of US$181 million” for the first quarter of 2021, wrote analysts Praveen Choudhary, Gareth Leung and Thomas Allen, in a Sunday memo.
“This is 23-percent lower than fourth-quarter 2020 due to seasonality (weaker retail, hotel, and food and beverage revenues sequentially) and higher operating expense quarter-on-quarter as a result of uneven recovery in first-quarter 2021,” they added.
The banking group said it expected daily operational expenditure of Macau casino operators to have risen by 5 percent to 8 percent in the first quarter of 2021, compared to the previous three months. That was due to an “uneven recovery” in the market, with better performance in March than in the first two months of the year.
First-quarter operating expenses would still be down 27 percent compared to the first three months of 2019, said the Morgan Stanley team.
Macau’s aggregate casino GGR in the three months to March 31 this year stood at MOP23.64 billion (US$2.95 billion), down 22.5 percent from a year earlier, but up 8.3 percent from the last quarter of 2020.
While official data on the breakdown between VIP and mass-market revenue is not yet available, “many companies have highlighted that [GGR] growth was mainly driven by mass, especially premium mass and that VIP remained sluggish,” said the Morgan Stanley team.
The institution estimated that VIP revenue in the first quarter “declined by 3 percent quarter-on-quarter to US$0.6 billion,” and mass revenue – including slots – “grew by 11 percent quarter-on-quarter to US$2.3 billion.”
Morgan Stanley’s analysts stated that earnings revisions for 2021 “remain negative,” and that they expect EBITDA for the Macau casino industry to “decline by another 20 percent or so.”
