Consensus Property EBITDA estimates of US$2.1 billion for Macau’s casino operators could be overly inflated, according to investment bank Morgan Stanley, with a quarter-on-quarter decline in mass gaming revenues combined with rising costs potentially impacting operators’ bottom line.
While consensus has Property EBITDA rising by around 2% versus the March 2024 quarter, Morgan Stanley analysts Praveen Choudhary, Gareth Leung and Stephen Grambling said in a Monday note that Macau’s Q2 GGR has been tracking slightly down on Q1 and is expected to be down by 2% to 3% by the end of June. June GGR, they estimate, will come in at MOP$18 billion (US$2.24 billion), down 11% month-on-month.
By operator, the analysts see most downside to Sands China’s 2Q24 GGR and EBITDA estimates due to their expectation that the company will have lost mass market share on construction disruption at The Londoner Macao.
However, they see Galaxy Entertainment Group achieving 9% quarter-on-quarter EBITDA growth and SJM 8% growth thanks to ongoing ramp of Grand Lisboa Palace.
MGM China at a 16% drop, Wynn Macau at 11% and Melco at 4% are all seen suffering EBITDA declines in 2Q24, however much of this has already been priced into their respective share prices.
“We remain selective on stocks,” Morgan Stanley said. “We prefer Galaxy (share gain) and MGM China (market is being too pessimistic) for 2Q results.”
