A number of Macau’s casino concessionaires could report negative EBITDA for the three months to 31 March 2022, driven by weaker visitation and revenue throughout much of March.
According to an earnings preview published by investment bank Morgan Stanley on Tuesday, industry EBITDA is likely to decline quarter-on-quarter to a loss of US$102 million. Morgan Stanley analysts also estimate free cash flow to equity (FCFE) to be negative US$364 million and FCFE including development capex to reach negative US$900 million.
As previously reported by Inside Asian Gaming, the investment bank had suggested some operators, namely SJM Resorts, could run out of cash in just three months, however that was at the 4Q21 FCFE run rate – meaning the current situation now looms as even more dire.
Three of Macau’s six concessionaires are predicted to report an Adjusted EBITDA loss in 1Q22 with SJM to be hardest hit with a HK$575 million (US$73 million) loss, followed by Wynn Macau with a HK$292 million (US$37 million) loss and MGM China with a HK$214 million (US$27 million) loss.
Conversely, Melco Resorts is seen edging to positive EBITDA of US$50 million, Sands China US$101 million and Galaxy Entertainment Group HK$702 million (US$90 million).
Noting issues currently impacting the stock prices of all six concessionaires, Morgan Stanley analysts said it expects SJM to take an impairment in April for the closure of Golden Group’s junket rooms recently.
“Lower win rate in direct VIP business could have big negative impact on EBITDA,” they wrote.
“Several satellite casinos have announced closures even before December 2022 and this could have detrimental effect on SJM’s financials.”
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