Macau’s January GGR, which saw the market post its highest monthly revenue result in three years, represented a “solid beat” over sell-side consensus and suggests recovery is tracking two or three quarters faster than expected, analysts said Wednesday.
The Gaming Inspection and Coordination Bureau (DICJ) reported total GGR of MOP$11.58 billion (US$ for January, the highest monthly tally since January 2020 and well above expectations of between MOP$8 billion and MOP$9 billion.
The improvement follows the reopening of borders on 8 January and was aided by the timing of Chinese New Year just a few weeks later, however analysts were still flag-waving on Wednesday with JP Morgan’s DS Kim noting that such a recovery was “unthinkable” until very recently.
“The print was undoubtedly a clean beat,” he wrote.
“At this level, all operators … are already and comfortably printing positive Free cash flows (EBITDA + interest costs + maintenance capex), an important milestone that we’ll be able to confirm from 1Q results later.
“This, if true, would be 2-3 quarters earlier than what the market had expected/modelled and thus very positive fundamentally.”
While time will tell if this rapid recovery trajectory can be maintained, Kim added, “One thing seems very clear to us: the Street estimates will have to go up substantially for 1Q23 and FY23.”
CBRE Equity Research analyst John DeCree said that, given the absence of junkets and VIP play in the market, the higher-margin mass market segment appears to have recovered significantly beyond the total GGR recovery of 52%, “perhaps in the 70% range.”
“This run-rate level of mass market GGR would put most operators on the path to meaningful EBITDA contribution and even positive cash flow in 1Q23 — ahead of expectations,” he wrote.
“This trend is a signal of pent-up demand and a premium-led recovery, with spend per visitor tracking higher — similar to the recovery experienced in the US and other gaming markets that ultimately led to gaming volumes exceeding pre-pandemic levels. While it is too early to say if GGR could exceed 2019 levels any time soon given the significant contraction of the VIP business, the cadence of a mass market recovery is nonetheless encouraging and points to a sharper recovery in profitability than previously expected.”
Credit Suisse analysts Kenneth Fong and Sardonna Fong were more subdued in their estimates, however, noting that the street is unlikely to move its 2024 estimates based on a single month’s numbers.
“The sustainability of recovery pace remains key to watch into Feb/Mar as the strong Macau performance so far is also the result of several temporary drivers such as limited travel option for Mainland Chinese, with only 10% of 2019 international flight capacity,” they said.
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