Negative EBITDA expected for casino operators facing mayhem

The current Covid-19 outbreak against which the city is waging war is set to lead to a negative EBITDA for casino operators in the second quarter.

In April, Macau saw a steep plunge in gross gaming revenue (GGR) – considered the city’s worst since September 2020 and garnering MOP2.68 billion.

A slight uptick was recorded in May as revenue grew nearly 25% month-on-month to MOP3.34 billion. However, last month’s revenue faced a downturn as the city is in the grips of a Covid-19 resurgence: income fell to MOP2.47 billon, the lowest in 20 months.  

According to a note from JP Morgan Securities (Asia Pacific) Ltd, total GGR in the second quarter was MOP8.5 million, which is a “meager 12% of the pre-Covid level.”

Analysts DS Kim and Livy Lyu noted that, “at this level, none of the operators would be able to generate positive EBITDA […] not even Galaxy [Entertainment Group],” as cited in a report issued by GGRAsia.

Previously, analysts have noted that Macau’s GGR may hit “near-zero levels” for at least a few weeks until the situation is under control.

With this scenario likely, the brokerage firm expects that SJM and Sands China will only have enough liquidity to survive until March next year, it said in a previous note.

Only Galaxy was expected to have enough cash for the next five years, according to the analysts, while other operators will have at most two years of liquidity.

Meanwhile, Deutsche Bank Securities Inc has updated its third-quarter predictions for Macau casino revenue and forecasts that third quarter GGR will be down 31% year-on-year from USD2.34 billion to USD1.62 billion.

Credit Suisse recently reported that it may take years for the city’s GGR to return to pre-pandemic levels, noting that revenues will return to 80% of 2019 levels by 2024.

The investment bank slashed EBITDA forecasts for concessionaires by 19% to 53% and target prices by 15% to 60%.

It has also lowered its target price for Macau concessionaires between 10% and 59% to take into account the weaker demand.