Three Macau casino operators could report negative EBITDA for Q1
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.
