Macau: casinos to report break even EBITDA for 1Q

Morgan Stanley analysts estimate that Sands China and Galaxy Entertainment have performed best during the first quarter.

Macau.- Despite the being shut down for two weeks in February and the on-going economic impact of Coronavirus, Macau’s casinos could report “almost break even” levels of EBITDA for the first quarter of the year.

This is based on research carried out by analysts Morgan Stanley.

According to Morgan Stanley, EBITDA break-even required “roughly” MOP330million (US$41.3million) per day in gross gaming revenue (GGR).

On April 1, the city’s casino regulator reported Macau industry first-quarter GGR of MOP30.49billion, down 60 per cent year-on-year.

Sands China and Galaxy Entertainment Group were revealed to have performed the best due to income from their shopping malls meaning they were less affected by the casinos closures.

“We expect Sands China to report property EBITDA of US$55million, aided by retail rental (which is helped by a stable base rent component and does not have much fixed costs),” Morgan Stanley analysts said.

They added that Galaxy Entertainment “should post corporate EBITDA of HKD160million (US$20.6million), helped by factors including its construction material division and retail business.”

Morgan Stanley stated Melco Resorts and Entertainment Ltd was likely to report “negative property EBITDA of US$7million” in Macau for the three months ended March 31 , while its casino-operation business at City of Dreams Manila could post US$30million “since the casino was closed at a much later stage in the quarter.”

Regarding Macau operators Wynn Macau Ltd and MGM China Holdings Ltd, Morgan Stanley warned that they would register corporate EBITDA losses of US$1million and HKD113 million respectively.

Analysts added that SJM Holdings Ltd was likely to have a first-quarter corporate EBITDA loss of HKD119million despite revenue sharing at so-called satellite casinos – casino hotels with third-party ownership but using SJM Holdings’ Macau gaming licence.

Forecasts for MGM China noted the company could report negative first-quarter EBITDA “due to higher fixed costs” at MGM Cotai.

In line with previous analysis, the researchers expect the VIP sector to fuel the recovery in the second quarter.

“We expect VIP to recover faster than mass, which could help Galaxy [Entertainment] and Wynn [Macau] more than others.”