Some Macau gamblers that had previously been hosted by junkets do indeed appear to be “migrating to direct VIP and premium mass,” aiding the return to positive earnings since the start of the calendar year, said a Wednesday note from Hong Kong-based analyst Andrew Lee, at Jefferies Group LLC. He was citing commentary from two United States-based casino groups that have units operating in Macau and that had reported their fourth-quarter results that day.
The final-quarter numbers were from MGM Resorts International, and its majority-owned Macau unit MGM China Holdings Ltd which runs MGM Macau and MGM Cotai; and Wynn Resorts Ltd, parent of Wynn Macau Ltd, operator of Wynn Macau, and Wynn Palace in the Cotai district.
Mr Lee observed that the fourth quarter was “not the focus” of investors, as it related to a period before mainland China and Macau relaxed their Covid-19 control rules, a change that occurred in early January.
But the analyst said the Macau market recovery was “following” the sort of strong uptick in business that had been seen in the Las Vegas, Nevada, casino market in the U.S., after it returned to pre-pandemic operating conditions in mid-2021.
DS Kim, of JP Morgan Securities (Asia Pacific) Ltd, stated in a Thursday note on MGM China, citing its management: “Volumes for both mass and direct VIP had recovered to ‘well above’ 2019 lunar new year’s, in turn allowing the company to generate a very large US$5 million per day” in earnings before interest, taxation, depreciation and amortisation (EBITDA) in January. “We believe [this] should be near its record levels,” said Mr Kim.
He added: “MGM’s GGR [gross gaming revenue] market share – including VIP – was 16 percent in January, significantly ahead of 9 percent to 10 percent levels back in 2019. It seems that the company has gained shares in both mass and direct VIPs thus far into the post-Covid recovery.”
In a separate note on Wynn Macau Ltd – which had been a specialist in serving junket-hosted VIP players prior to the shrinkage of that market in late 2021 – Mr Kim said that during the latest Chinese New Year period in late January, “direct VIP volume rose to 140 percent of 2019 lunar new year levels”.
Although Mr Kim did not mention the 2019 baseline for direct VIP business, he said the rejig in the structure of Wynn Macau Ltd’s market had allowed the firm “to retain its total GGR market shares versus 2019 despite the demise of junkets and to print daily EBITDA of US$4 million during lunar new year”.
Jefferies Group’s Mr Lee said that business volumes after the week-long period remained “stronger” than the market’s “usual trend”. It was a “strong start to the year driven by strong pent-up demand,” he stated.
Although the brokerage estimates that GGR and visitor arrivals to Macau had peaked as “part of the post-holiday blues”, it suggested that Macau gaming revenue remained “above break-even and stronger” than expectations, with average daily revenue of MOP380 million (US$47.0 million) in the first five days of February.
“We estimate 2023 and 2024 GGR at 49 percent and 64 percent of 2019 pre-pandemic levels, at MOP390 million a day and MOP508 million a day,” respectively, said Mr Lee.
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Teo Chun Ching
Chief executive of Singapore’s Gambling Regulatory Authority