Morgan Stanley sees mass gaming revenue decline in Q2

Macau’s casino industry is facing a mixed outlook for the second quarter of 2024, with Morgan Stanley predicting a decline in mass-market gross gaming revenue (GGR) and potential downside to consensus earnings expectations for the operators.

According to the banking group’s analysis, Macau’s mass-market GGR “could be down 2% to 3% quarter-on-quarter” when the final numbers are in for the second quarter. The analysts expect Macau’s GGR for June specifically could narrow by as much as 11% month-on-month, reaching MOP18 billion. This comes after May delivered the best monthly GGR since the onset of the COVID-19 pandemic in early 2020.

The assessment is in line with a June 10 report from brokerage CLSA Ltd, which indicated player rebates and other player reinvestment in the Macau casino market had been growing faster, percentage-wise, quarter-on-quarter than market-wide GGR.

In the first quarter of 2024, revenue from mass-market baccarat stood at nearly MOP34.59 billion, up 3.1% sequentially, representing circa 60.3% of market share. Overall, the mass-market segment – including slot machines – accounted for 74.9% of Macau’s total casino GGR.

Morgan Stanley observed its research indicated overall Macau GGR was “tracking down 1% to 2% quarter-on-quarter” in the second quarter.

“Consensus expects second-quarter property EBITDA at USD2.1 billion (+2% quarter-on-quarter, -2% quarter-on-quarter on a hold-adjusted basis),” the institution noted, adding that it sees “downside to this number.”

The analysts provided specific reads on each of Macau’s six casino concessionaires regarding the second quarter. They see the most downside to Sands China’s EBITDA due to ongoing construction disruptions at The Londoner Macao, but expect Galaxy Entertainment Group and SJM Holdings to achieve EBITDA growth of 9% and 8% respectively.

“We remain selective on stocks,” Morgan Stanley said. “We prefer Galaxy (share gain) and MGM China (market is being too pessimistic) for 2Q results.”

The banking group’s assessment comes as the Macau casino market continues to navigate its recovery from the COVID-19 pandemic. While the mass-market segment has been a bright spot, the potential decline in GGR and rising costs could impact the operators’ bottom line in the second quarter.

Morgan Stanley’s analysis highlights the need for the industry to closely monitor market trends and adapt their strategies accordingly to weather the challenges ahead. Victoria chan