Banking group Morgan Stanley thinks Macau mass-market gross gaming revenue (GGR) “could be down 2 percent to 3 percent quarter-on-quarter” when the final numbers are in for this month.
It thinks Macau’s GGR for June specifically, could narrow by as much as 11 percent month-on-month, at MOP18 billion (US$2.24 billion). May had been a standout month, delivering the best monthly GGR since the onset of the Covid-19 pandemic in early 2020.
“We see downside to sell-side consensus second-quarter EBITDA [earnings before interest, taxation, depreciation and amortisation],” added analysts Praveen Choudhary, Gareth Leung and Stephen Grambling.
That assessment was “based on a decline in mass revenue and rising costs quarter-on-quarter,” added the memo.
A June 10 report from brokerage CLSA Ltd said its research indicated player rebates and other player reinvestment in the Macau casino market had been growing faster, percentage-wise, quarter-on-quarter than market-wide GGR.
In the three months to March 31, revenue from mass-market baccarat stood at nearly MOP34.59 billion, up 3.1 percent sequentially, representing circa 60.3 percent of market share, according to market-split data from the city’s regulator, the Gaming Inspection and Coordination Bureau.
In the first quarter, aggregate Macau revenue in the mass-market segment – including slot machines – stood at just under MOP42.95 billion. Such mass GGR was 74.9-percent of Macau’s overall casino GGR in the January to March period.
In its assessment for the second quarter, issued on Friday, Morgan Stanley observed its research indicated overall Macau GGR was “tracking down 1 percent to 2 percent quarter-on-quarter”.
The institution noted: “Consensus expects second-quarter property EBITDA at US$2.1 billion (+2 percent quarter-on-quarter, -2 percent quarter-on-quarter on a hold-adjusted basis).”
2Q earnings outlook by operator
Morgan Stanley also had some specific reads on each of Macau’s six casino concessionaires regarding the second quarter.
Regarding Sands China Ltd, the bank said consensus expected EBITDA at US$657 million, i.e., up 8 percent sequentially.
“We see downside to this number as we expect Sands to have lost mass GGR market share quarter-on-quarter in the second quarter related to ongoing construction disruptions,” said the analysts.
Sands China’s Londoner Macao property was down by as many as 3,000 rooms during the second quarter, due to renovation there.
“We see more negative earnings revisions for Sands,” added the Morgan Stanley memo.
Galaxy Entertainment Group Ltd “we know” had gained market share in April and May, asserted the Morgan Stanley team.
The market anticipated +9 percent EBITDA expansion sequentially in the second quarter. “We think Galaxy may be able to achieve this… given market share gains could be bigger than consensus expects,” stated Morgan Stanley.
Consensus expected Melco Resorts & Entertainment Ltd’s second-quarter EBITDA to be down 4 percent quarter-on-quarter on a hold-adjusted basis, “which could potentially be in line or a slight beat,” said the Morgan Stanley team.
For Wynn Macau Ltd, consensus expected EBITDA -11 percent sequentially. “Wynn [Macau Ltd] did lose market share in both April and May, and mass GGR could be down 7 percent to 8 percent quarter-on-quarter,” said Morgan Stanley, though it added “since costs are flattish, EBITDA may have been better”.
For MGM China Holdings Ltd, consensus expected EBITDA at -16 percent on a hold-adjusted basis. “We think mass GGR could be -9 percent quarter-on-quarter, on market share loss”. Though Morgan Stanley further noted: “EBITDA decline could be less if MGM [China] costs peaked in first quarter 2024.”
At SJM Holdings Ltd, consensus expected high EBITDA growth of +8 percent sequentially. “We think SJM [Holdings] may be able to achieve this given Grand Lisboa Palace ramp,” wrote Morgan Stanley, referring to business pickup at the casino firm’s Cotai resort that had opened during the pandemic.
SJM Holdings saw its first-quarter EBITDA leap year-on-year in highlight results issued in May.
