In the first nine months of this year, the Macau gaming sector offered the equivalent of circa US$2.7 billion in premium-player rebates and player reinvestment, or about “17 percent to 18 percent” of Macau’s total gross gaming revenue (GGR) of circa US$16 billion for the same period, suggests research from brokerage CLSA Ltd.
That compared to an average of 22 percent of Macau annual GGR going into player rebates and reinvestment in the pre-Covid-19 trading period covering the years 2017 to 2019, said CLSA analyst Jeffrey Kiang, citing the organisation’s own checks.
His comments were in response to enquiries by GGRAsia about a recent research note from the brokerage concerning industry margins and Macau industry earnings before interest, taxation, depreciation and amortisation (EBITDA).
The years 2017 to 2019 encompassed a period when junket-based VIP play – anecdotally associated with high levels of player reinvestment – was still a major component of the Macau market.
The issue of the current level of competition among Macau’s six casino operators regarding player reinvestment levels for premium-mass players – including complimentary services to clients – has been discussed recently by a number of investment analysts, and acknowledged by senior management in the Macau market.
“Considering Macau has structurally shifted to more mass-focused [play], we reckon rising rebates and reinvestments in 2023 year-to-date reflects [that] competition among operators – for premium mass – has not been easy,” CLSA’s Mr Kiang told GGRAsia. That was despite the fact the number of visitors to Macau was “still growing,” he added.
He said that in CLSA’s view there was “lower room” currently for margin expansion among Macau casino operators due to operational factors including “rising” player rebates.
The analyst remarked: “MGM China – with EBITDA already exceeding pre-Covid level since the second quarter – is a proof of that. Its EBITDA margin has remained steady at circa 30 percent in the second quarter and third quarter, despite a 24 percent quarter-on-quarter growth of visitations in Macau from the second quarter to third quarter.”
Mr Kiang told GGRAsia the institution was lowering its forecast for Macau-market adjusted EBITDA.
He stated: “We have lowered our [adjusted EBITDA] projection in 2023 and 2024 by 2 percent and 5 percent respectively.” That would put Macau-wide adjusted EBITDA at US$6.7 billion for 2023, and US$8.9 billion for 2024.
CLSA maintains its forecast of Macau casino GGR for 2023 at US$22.5 billion, and 2024 at US$29.2 billion.
