Banking group Morgan Stanley has raised its 2018 estimates for Macau-wide mass-market gross gaming revenue (GGR) by 3 percentage points, to 15 percent. It now expects such revenue to amount to nearly MOP141.45 billion (US$17.5 billion) for the 12 months to December 31.
“The 2018 outlook remains bright. We estimate Macau adjusted mass revenue grew by 16 percent for the first two months of the year, while GGR grew by 19.7 percent. We retain our 2018 [overall] GGR [growth forecast] at 16 percent but adjust our mass revenue growth estimate to 15 percent (from 12 percent),” wrote analysts Praveen Choudhary, Jeremy An and Thomas Allen, in a Monday note.
“We expect further earnings revisions,” the Morgan Stanley team added, noting the impact of what they termed “operating leverage”. Typically, a business that makes sales that offer a high gross margin and limited fixed costs and variable costs is considered to have high operating leverage.
“We believe the operating leverage will continue into 2018 and expect the market to deliver EBITDA [earnings before interest, taxation, depreciation and amortisation] growth of 23 percent and 14 percent in 2018/19, higher than our GGR forecasts of 16 percent and 12 percent,” stated Morgan Stanley.
In other Monday commentary on the Macau market, brokerages Sanford C. Bernstein Ltd and Japanese institution Nomura respectively estimated that average daily GGR in the prior week had been up 30 percent judged year-on-year, or in the range of MOP925 million to MOP935 million.
“In addition to continued strong underlying demand trends we are seeing in Macau, we believe last week saw an incremental boost from Suncity’s and Tak Chun’s annual spring dinners,” noted Nomura analysts Harry Curtis, Daniel Adam and Brian Dobson. That was a reference to social events held for gambling clients and agents working with two of Macau’s largest licensed promoters of VIP play, organisations also known as junkets.
Sanford Bernstein also noted the likely impact of the Suncity and Tak Chun spring dinners on last week’s market daily GGR.
Its analysts Vitaly Umansky, Zhen Gong and Cathy Huang also observed: “VIP hold has edged up above normal level for the month (with the last two weeks seeing high hold). VIP per day volumes are down low single digits, while mass volumes are down mid single digits, compared to February.”
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Analyst at Roth Capital Partners