Investment bank Morgan Stanley said in a new research note that it expects Macau industry-wide EBITDA to reach US$1.6 billion for the June 2023 quarter, representing a 46% improvement over Q1 and the first quarter in which both mass revenue and EBITDA have been within touching distance of pre-COVID levels.
According to analysts Praveen Choudhary, Gareth Leung and Stephen Grambling, the 2Q EBITDA result will be driven by a 29% quarter-on-quarter increase in industry-wide mass and slot GGR to US$4.79 billion, with further positive momentum tipped for the second half of the year.
Echoing similar research from the past week suggesting Macau’s mass gaming market has benefited from a series of high-profile concerts in recent months, Morgan Stanley noted that “a few major concerts helped in 2Q” – a trend they expect to continue in 3Q23. They also point out that Q2 visitation was only at 60% of 2019 levels and more than 5% of hotel rooms have been offline, “suggesting upside to 3Q and 4Q estimates.”
Maintaining their bullish outlook, the analysts write, “Spending per visitor is tracking 50% above 2019 level. Further upside to mass revenue could come from recovery in package tours, visitation from provinces further away from Macau and improving capacity for ferry and air travel.
“We forecast industry mass revenue to reach 115% and 125% of 2019 level in 2024 and 2025 [respectively].”
Notably, the analysts believe the return of mass GGR and EBITDA numbers to near-2019 levels will see market share levels stabilize, although they anticipate some significant upwards movers from Q1 to Q2 – namely Wynn Macau and Melco Resorts.
Wynn, they explain, is likely to have benefited from the renovation of its peninsula property Wynn Macau, with Melco aided by the opening of Studio City Phase 2’s indoor waterpark and EPIC tower, as well as its residency concert series.
Conversely, Sands and Galaxy are expected to have lost market share due to the negative impact of not having all hotel rooms fully operational, although this issue should fully resolve in Q3.
But it is MGM China, awarded an additional 200 gaming tables under its new 10-year concession, that remains Morgan Stanley’s top pick.
“We expect [MGM’s] 2024 mass market share at 13% and 2Q could be tracking at 14% to 15% (16% in 1Q),” said Choudhary, Leung and Grambling. “This means [estimated] 2024 mass revenue to be at least 30% above 2019 even if we assume no growth in industry mass revenue vs 2019.
“Consensus forecasts MGM 2024 EBITDA to be only 10% above 2019, which probably does not give enough credit to its market share or the benefits of operating leverage. Our [estimated] 2024 EBITDA [for MGM] is 30% higher than 2019.”
