United States-linked operators in the Macau casino market are benefitting from “pent up demand” since the ending of Covid-19-related restrictions in mainland China, Macau and Hong Kong, says JP Morgan Securities LLC, citing comments from U.S.-based management.
Thoughts on the Macau market were provided by Daniel Briggs, senior vice president of investor relations at Las Vegas Sands Corp, parent of Sands China Ltd, and also parent of the promoter of the Marina Bay Sands casino resort in Singapore.
Also giving comments were: Julie Cameron Doe, chief financial officer of Wynn Resorts Ltd, parent of Wynn Macau Ltd; and Corey Sanders, chief operating officer, and his colleague Sarah Rogers, senior vice president corporate finance at MGM Resorts International, parent of MGM China Holdings Ltd.
The occasion was this week’s JP Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum, in the United States.
For Las Vegas Sands – which runs four Cotai gaming venues and linked resorts, and a property on the city’s peninsula – the “first leg” of the Macau-market recovery was “from the highest value, wealthiest Chinese consumer, which has supported premium mass revenues,” said a memo update on the event from JP Morgan analysts Joe Greff, Omer Sander, and Ryan Lambert.
Las Vegas Sands also said regarding Macau, that with the growth in premium mass and what was described in the brokerage’s memo as “incremental” business from VIPs directly managed by the operator, rather than via legacy junkets, the group expected to reach or exceed 2019 levels for earnings before interest, taxation, depreciation and amortisation (EBITDA).
“Importantly, given the mix shift, this should come at nicely higher EBITDA margins, given junket VIP was a 10 percent to 15 percent margin business,” wrote the JP Morgan team, citing the Las Vegas Sands management.
In the Singapore operation, the premium segment had also led the recovery, with Las Vegas Sands of the view this “still has legs” as China visitor volume continues to improve for the city-state, and airline capacity improves.
JP Morgan said in its summary of management’s commentary: “In 2019, China represented one-third” of Marina Bay Sands profits. “The local business is bigger than it’s ever been, aided by population migration to Singapore over the past few years, which is driving very strong results on the slot side,” it added.
As per the Wynn group’s management commentary, JP Morgan mentioned in a separate note that Wynn Macau Ltd’s market share had recently been about 15 percent of local gross gaming revenue, which has been “an improvement versus 2019 levels even without any junket business”.
Management thought market share gain was “being driven by its premium room offering” at its properties Wynn Macau on the city’s peninsula, and the newer Wynn Palace in the Cotai district.
JP Morgan also cited the Wynn group saying the leadership setup in Macau had been recently restructured, with, in the brokerage’s words, “both properties operating in a more coordinated fashion, as opposed to a more siloed approach pre-Covid”.
JP Morgan also noted that Wynn Macau Ltd had recently hired a chief marketing officer, “which should help drive programming and visitation across both properties”.
The institution added the Wynn group “thinks there is a decent opportunity to convert junket VIP players to direct” customers in Macau.
A note on MGM Resorts’ contribution to the investor forum said the Macau operation of MGM China – where it runs MGM Macau and MGM Cotai – “sees market share as sustainable in the mid-teens” of percent, “with expansions in [gaming] tables, post-concession renewal, and marketing programmes helping sustain market share above pre-pandemic levels”.
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