Three Macau casino operators could report negative EBITDA for Q1

Casinos were affected by weaker than expected visitation in the second half of March.
Casinos were affected by weaker than expected visitation in the second half of March.

Analysts at Morgan Stanley predict three of Macau’s six casino operators could report negative EBITDA in the first quarter.

Macau.- Morgan Stanley has said it expects Macau’s overall gaming EBITDA to fall 45 per cent quarter-on-quarter to US$73m for Q1. Analysts Praveen Choudhary, Gareth Leung, and Thomas Allen said performance is lower than expected because of poor traffic/revenue in the second half of March.

They say three Macau operators are likely to report negative EBITDA for the first quarter: MGM China Holdings, which operates MGM Macau and MGM Cotai; SJM Holdings, which owns Grand Lisboa and Grand Lisboa Palace; and Wynn Macau, the operator of Wynn Macau and Wynn Palace in Cotai.

They predict Wynn Macau Ltd’s first-quarter EBITDA loss will be about HK$105m (US$13.4m) but will still be better than market expectations of a negative HK$292m. MGM China’s quarterly EBITDA loss would be around HK$79m, unchanged from the third quarter but better than the consensus estimate of a negative HK$214m.

SJM’s quarterly EBITDA loss is expected to be HK$603m, compared to market expectations of a negative HK$575m.

Analysts said: “We are assuming operational expenditure to remain flattish quarter-on-quarter. Thus, lower GGR could mean lower EBITDA.”

They added: “Our cash flow analysis shows that companies’ cash can last for eight to 44 months, but that is based on fourth-quarter financials. March/April 2022 are much weaker, and cash drain is much higher.”

Morgan Stanley said late March that Macau’s casino industry had reported a loss of about US$800m per quarter and a cash flow leakage of about US$250m, with total net debt having grown from US$5bn at the end of 2019 to US$20bn by the end of 2021.

Macau casinos’ gross gaming revenue (GGR) in March was the lowest since September 2020, as the Covid-19 outbreak in mainland China continued to restrict travel. GGR was down 52.7 per cent month-on-month, from MOP7.76bn (US$963.8m) to MOP3.67bn (US$454.5m).

Macau average daily revenue up 3% last week

Sanford C. Bernstein Ltd reported that average daily sales in Macau reached MOP100m in the week ended April 10 week-on-week. That’s a 3 per cent increase on the previous week, but still down 16 per cent when compared to March.

VIP transaction volume was down a mid-to-high 20 per cent compared to March, maintaining a normal rate. Daily mass GGR is down around ten per cent compared to the previous month.

Month-to-date gross gaming revenue was MOP1bn (US$123m), down 87 per cent from pre-pandemic levels and down 64 per cent from a year earlier. Analysts predict full-month GGR will be down 86 per cent from 2019 levels, although it could be weaker if travel restrictions are tightened further due to the increasing Covid-19 cases in China.

In this article:
Covid-19 Macau casinos