JP Morgan: Macau’s recovery still in early stages
Macau’s recovery is still in the early stages, even though casino stocks have more than doubled in the last three months, according to JPMorgan analysts DS Kim and Mufan Shi, as cited in a Dow Jones report.
With the robust recovery following the abandonment of the zero-Covid policy and consequent reopening of borders, the gaming sector has been recording rising revenue – a long awaited development after the sector bled cash every day for the past three years.
JP Morgan now expects mass gross gaming revenue(GGR) to reach pre-Covid levels at the end of 2023, compared to its previous expectation of a full recovery by mid-2024.
Late last year, following the easing of visa issuances, JPMorgan forecasted that the gaming industry could reach 95% of pre-pandemic revenue levels in 2024.
Kim says the recovery will be driven by pent-up demand from an expanding mass market.
The outlook was based on the new gaming law that allows gaming operators to lower their taxes when they attract more foreign tourists, as well as an increase in the market-wide cap on gaming tables to 6,000, up from 4,000 in 2019.
According to the brokerage firm, Macau’s casino sector may be entering the biggest bull market cycle in over five years, with Galaxy Entertainment and Sands China as its top picks, followed by MGM China and Wynn Macau.
JPMorgan Securities (Asia Pacific) Ltd. has a positive outlook on the revenues as February’s daily average seems to be higher than last month, where the Lunar New Year was celebrated.
The banking institute indicated that last week’s GGR was about MOP400 million, a figure that is considered to be the “best non-holiday print” in over three years.
In the note, analysts estimated that the GGR could be as high as MOP7.2 billion for the first three weeks for this year.
“VIP recovery, which we estimate to be at around 15% of pre-Covid levels, has also been tracking solidly for a segment that’s been considered ‘gone’ given the demise of junkets,” analysts said, as cited in a note seen by GGR Asia.
In another note, Morgan Stanley is forecasting that the city’s operators’ EBITDA would be raised by some 70% this year to USD3.51 billion.
In 2022, so far, gaming operators including Sands China, Wynn Resorts and MGM China have reported negative EBITDA as they faced weaker demand.
Last year, the government recorded MOP19.11 billon in gaming taxes, 56% lower than expected.
