Macau’s concessionaires should all enjoy a significant boost to profits in the September 2023 quarter, with EBITDA tipped to reach 80% of pre-COVID levels for most and 120% for the resurgent MGM China.
Releasing its latest 3Q23 estimates this week, investment bank Morgan Stanley said the improved profitability would be a factor of ever-increasing gross gaming revenues – particularly in the mass sector – and slowing incremental growth in operating expense as more hotel rooms come into operation.
Claiming that industry-wide GGR would grow by 12% and EBITDA by 17% quarter-on-quarter in 3Q23, analysts Praveen Choudhary and Gareth Leung added that corporate EBITDA would reach 80% of pre-COVID levels for all except MGM, up from 65% in Q2.
MGM’s much stronger performance is a combination of “having more tables, redesigned casino floors, adding F&B (including bubble tea) on the floor, removing walkway at the casino floor, use of RFID chips, creative marketing programs, and personalized experiences rendered,” they said. “Peers are acknowledging the lead, and hoping to pick up a trick or two.”
Despite the opening of more hotel rooms and gaming space at other properties in recent months – Galaxy Phase 3 and Studio City Phase 2 among them – MGM maintained 14% GGR market share in the June quarter and is expected to maintain at least 13% share moving forward.
“By the end of 2Q23, the majority of [Macau’s hotel rooms] were in operation,” said Choudhary and Leong in explaining the factors behind rising profitability. “This suggests that incremental growth in operating expense will be much less in 3Q/4Q across the board, resulting in strong operating leverage.”
The analysts also observed little impact on Macau’s operators from a weaker China macro, echoing their sentiments that “similar to luxury sales in China, the top 1% of mainland Chinese are traveling and spending on entertainment.
“This is why the [Macau] recovery is premium led (and grind mass has lagged),” they said.
“Younger patrons are visible on casino floors as well as around the resorts. High end customers are spending as much or even more than pre-COVID levels.”
While it is too early for any visibility on how the October Golden Week is shaping for Macau, Morgan Stanley said most hotel rooms are already blocked for August and September – potentially easing concerns over the traditional September seasonal slowdown.
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