CLSA: 2024 GGR projections down amid regulatory headwinds

CLSA Ltd has revised its forecast for the SAR’s gross gaming revenue (GGR) and earnings before interest, taxation, depreciation and amortization (EBITDA) for 2024 and 2025, according to a recent report.

The brokerage has lowered its GGR projections in 2024 to MOP232.7 billion, a 27% year-on-year increase, and expects 3.9% growth to MOP241.7 billion in 2025.

The revised forecast is attributed to a seasonally weak June, when Macau’s GGR was MOP17.69 billion, the lowest so far this year.

The CLSA analysts also noted the impact of China’s crackdown on illegal money exchange activities, which has led to increased vigilance and a moderation in the number of inbound visitors.

“We lowered calendar year 2024 and 2025 GGR by 3% and 5.3% as we tweaked our visitation and GGR/visitor assumptions, factoring in DICJ [Macau’s casino regulator] reported second-quarter 2024 GGR of MOP56.4 billion, which is 1.6% lower than first quarter of 2024, as well as the impact from increasing vigilance against illegal money exchange activity from China,” wrote CLSA’s analysts.

According to GGRAsia, the analysts observed that although the second-quarter GGR was lower, stable balance sheets and sensible competition among operators should enable them to weather these short-term headwinds.

In June, Beijing initiated a fresh campaign aimed at reducing capital flight and illegal loan practices. The government’s recent efforts to clamp down on unauthorized currency exchanges are also geared towards preventing Chinese tourists from surpassing the limit of mainland currency allowed to be taken across the border during each trip.

Chen Shiqu from the Chinese ministry of public security has stated that illegal “money exchange gangs” operating near casinos are supplying gamblers with a significant sum of Hong Kong dollars in cash. The Hong Kong dollar is the primary currency used in the city’s casinos.

Additionally, CLSA has lowered its forecast for the gaming sector EBITDA for 2024 and 2025, due to increased promotional activity and rising payroll costs.

For 2024, CLSA expects sector-adjusted EBITDA of HKD63.3 billion, down 8% from its previous estimate. The forecast for 2025 is HKD71.7 billion, a 5.8% decrease from the previous projection.

The analysts also noted the sector’s EBITDA margin will contract 1.2 percentage points to 30.3% in the second quarter of 2024.

Despite the lowered forecasts, the CLSA analysts remain optimistic about the long-term prospects of Macau’s gaming sector, as it navigates the challenges of increased competition and regulatory changes. Nadia Shaw