Morgan Stanley reduces Macau 2022 GGR forecast to US$11bn

Morgan Stanley has lowered its predictions for Macau’s gross gaming revenue in 2022 due to multiple factors that have led to a weak market recovery.

Macau.- Banking group Morgan Stanley now expects Macau’s GGR for 2022 to be equivalent to US$11bn, 30 per cent lower than its previous estimate and 30 per cent lower than the figure reported in 2019. Mass and slot revenues for 2022 have been revised down by 26 per cent in the latest forecast.

Analysts also lowered their 2023 GGR estimate, in this case by 11 per cent, or 62 per cent of 2019 casino GGR. Mass and slot revenues are estimated to be 10 per cent lower than the previous forecast.

Last December, analysts had predicted casino GGR in 2022 and 2023 would reach 42 per cent and 70 per cent of 2019 pre-pandemic levels.

Praveen Choudhary, Gareth Leung, and Thomas Allen, analysts at Morgan Stanley, said: “Without a meaningful uptick in Macau visitor volume, including authorities in mainland China and Hong Kong easing travel policies relative to Covid-19 restrictions Macau casino companies will remain free cash flow negative, driving net debt higher and book value lower.”

They said the gaming industry is seeing more than US$800m in losses and US$250m in cash flow leakage per quarter

A report released by the banking group reads: “Net debt has moved from US$5bn at the end of 2019 to US$20bn at the end of 2021, and shareholders’ equity has moved from US$23bn to US$12bn.”

Morgan Stanley’s estimate for earnings before interest, tax, depreciation and amortization (EBITDA) is down 63 per cent from its previous forecast to US$1.4bn. In the first quarter of this year, Morgan Stanley expects the Macau sector’s EBITDA to increase by 8 per cent quarter-on-quarter, despite a flat quarter-on-quarter block revenue.

See also: Macau 2-month gaming tax revenue reaches US$711.18m