JP Morgan warns about Macau’s future

The brokerage said the three year streak for quarterly EBITDA growth could end in June, after Q2.

Macau.- The Macanese gaming industry was off to a rough start and JP Morgan warned more bad news may be coming. According to the brokerage, a three year streak of quarterly EBITDA growth may end during the second quarter, following poor results and no actions incoming to turn the tide around.

“For the first time in three years, we forecast industry EBITDA to print negative growth both quarter-on-quarter and year-on-year in the first quarter to second quarter of 2019, driven not only by anaemic GGR momentum (expected), but also by relatively soft margins (lesser-known),” JP Morgan analysts DS Kim and Sean Zhuang said.

“The impact of rising operating expense could be felt more acutely this year, where top-line growth will likely slow materially to flat to negative (it was up 18% in 2018),” they added.

Despite forecasting a GGR drop in full-year 2019, JP Morgan explained casino operators’ shares are worth a look as “most of the negatives are well known and already (if not overly) priced-in.”

In a January note signed by Kim and Zhuang, JP Morgan states that it still forecasts a 1% shrink for annual Macau GGR in 2019, while it expects the VIP market to go down by 6%, and mass-market revenue to expand by 3%.