GGRAsia – Negative 1Q operating leverage hits Macau EBITDA: Citi

Negative 1Q operating leverage hits Macau EBITDA: Citi

Apr 11, 2024 Newsdesk Latest News, Macau, Top of the deck

“Unfavourable hold” on casino games for the Macau operators in February “not only dwarfed” gross gaming revenue (GGR) “but also hit” earnings before interest, taxation, depreciation and amortisation (EBITDA), says a note from Citigroup, previewing first-quarter earnings for the sector.

Analysts George Choi and Ryan Cheung wrote: “Reflecting this negative operating leverage, we estimate that Macau’s industry EBITDA improved by only 2 percent quarter-on-quarter” in the three months to March 31, to just above US$2.02 billion.

This was despite first-quarter GGR rising circa 5.9 percent sequentially, to just under MOP57.33 billion (US$7.10 billion), from MOP54.11 billion in the fourth quarter last year.

Citigroup expects Wynn Macau Ltd to have gained 1.7 percentage points of GGR market share sequentially in the first quarter, to 15.1 percent, having “likely benefitted from luck,” and being “relatively unscathed in the unlucky month of February”.

The institution anticipates that MGM China Holdings Ltd gained 0.7 of a percentage point of share sequentially in the first quarter, to 17.0 percent. The analysts stated that the Bruno Mars concert at MGM Cotai in January “helped” the operator increase its share.

Citigroup referred in its update to MGM China’s early adoption of radio frequency identification (RFID) technology for its gaming table operations – a trend that has been building in the Macau market, according to public statements by operators.

“We believe its technological advantage over its peers is sustainable throughout most of this year, thanks to its early adoption of smart gaming tables,” stated the brokerage.

Referring to Grand Lisboa Palace, the Cotai flagship of SJM Holdings Ltd, and its first-quarter performance, Citigroup said: “We believe Grand Lisboa Palace’s market share held up at circa 2 percent” with volumes at the property “notably improved”.

Citigroup said market share “donors” in the first quarter were likely to have included Sands China Ltd, with its slice forecast to have been down 2.0 percentage points sequentially, to 23.4 percent, “likely hit by unfavourable hold”.

Galaxy Entertainment Group Ltd was anticipated to have lost 0.8 of a percentage point of share, to 17.1 percent, “impacted by disruptions from renovation works at Galaxy Macau’s mass concourse before Chinese New Year Golden Week”. That was reference to a rejig of the main gaming floor at the group’s Cotai flagship before the peak period of the lunar new year holidays for mainland China – Macau’s main tourism feeder market – in early February.

“We believe Melco’s share was largely unchanged,” added Citigroup, referring to Melco Resorts & Entertainment Ltd.

Deutsche Bank Securities Inc had mentioned a market share of 14.6 percent for Melco Resorts, for full-year 2023.