Morgan Stanley lowers Macau casino EBITDA forecasts for 2023

Morgan Stanley cites a slightly slower-than-expected market recovery.

Macau.- Morgan Stanley has made adjustments to its earnings before interest, taxation, depreciation, and amortization (EBITDA) estimates for Macau’s six casino operators. It’s revised its forecasts downwards by an average of 5 per cent reflecting its anticipation of a marginally slower-than-expected recovery in the Macau market.

In a recent note, analysts Praveen Choudhary, Gareth Leung, Stephen Grambling, and Nicholas DeValeria provided a revised EBITDA estimate for the entire Macau gaming industry of US$6.55bn for 2023, down from a previous estimate of US$6.90bn.

They project that the sector’s net revenue will reach US$24.05bn, with an industry-wide net profit of US$2.20bn, a 16 per cent decline from the previous estimate of US$2.61bn due to increased operating costs for Macau’s casino operators as business volumes continue to rise.

They have reduced their EDITBA protection for Sands China by 4 per cent to US$2.20bn due to lower mass-market share assumptions. They dropped the forecast for Galaxy Entertainment by 12 per cent to HK$11.18bn (US$1.43bn), primarily due to lower actual EBITDA figures for the second quarter, and the forecast for Wynn Macau by 7 per cent to HKD6.33bn, based on reduced market share assumptions.

However, two casino operators experienced positive adjustments in their 2023 EBITDA estimates. Morgan Stanley increased its EBITDA estimate for MGM China Holdings Ltd by 1 per cent, to HKD6.01bn and raised their estimate for Melco Resorts & Entertainment by 8 per cent to US$1.07bn, primarily due to lower operational expenditure.

Morgan Stanley has also lowered its 2024 EBITDA and net profit estimates for Macau’s gaming industry by 2 per cent. This adjustment is based on a lower slot revenue estimate, although overall gross gaming revenue remains unchanged due to higher VIP estimates.

Analysts emphasised that mass-market revenue in Macau has already returned to pre-Covid levels. However, they suggested that future outperformance depends on various factors, including reaching mass revenue levels of 120 per cent of 2019, gaining market share, maintaining operational expenditure discipline and managing financial leverage.