Macau’s casino operations are likely to have achieved in the second quarter “all-time high” margins in terms of earnings before interest, taxation, depreciation and amortisation (EBITDA), says JP Morgan Securities (Asia Pacific) Ltd. The institution estimated that sector-wide EBITDA margin peaked at 26 percent during the period.
The brokerage forecast in a memo issued over the weekend that the sector’s second-quarter EBITDA were likely to stand at US$1.7 billion, 47 percent more than those recorded in the first three months of the year. The estimate represented 73 percent of the quarterly EBITDA recoded by the sector in the second quarter of 2019, prior to the onset of the Covid-19 pandemic.
“The quarter should not only drive continued beat-and-raises [by investment analysts], but also please investors with an all-time high margin – 26 percent versus historical peak 24 percent – thanks to mix improvement and cost savings,” wrote analysts DS Kim and Mufan Shi.
The JP Morgan team added that margins could continue to improve, “to hit 30 percent by 2025”.
“The earnings up-cycle is far from over,” the institution said.
According to the brokerage, the period between April and June 2023 marked “the first quarter in more than three years that every [Macau] operator – including SJM Holdings Ltd – generated handsome free cash flows”.
Macau’s second-quarter gross gaming revenue (GGR) stood at MOP45.49 billion (US$ 5.65 billion), up 31.3 percent from MOP34.64 billion in the first three months of 2023, according to data released on Saturday 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.
“What’s important was mass GGR, which jumped approximately 30 percent quarter-on-quarter to hit near 90-percent recovery in the second quarter versus 67 percent in the first quarter,” said JP Morgan, citing its own estimates in terms of mass and VIP breakdown for the quarter.
Its analysts pointed out it was a “very impressive” performance, on both the pace of ramp up – “it was the first full quarter of re-opening” since Macau lifted most of its Covid-19-related entry restrictions in early January – and the quality of customers, with mass spend-per-visit estimated by the brokerage at approximately 30 percent above pre-Covid-19 levels.
JP Morgan added: “Though less meaningful, approximately 25-percent recovery in VIP also surprised us on the upside, as it implies the doubling of direct VIP business versus pre-Covid-19.”
