‘Worst quarter ever’ for gaming sector, predict analysts

American banking firm Morgan Stanley has predicted that the casino operators’ quarterly earnings before interest, taxes, depreciation, and amortization (EBITDA) for the second quarter of this year will be the “worst quarter ever,” expecting the six concessionaires to have a combined quarterly loss of around $1.04 billion (8.3 billion patacas).
Analysts at the firm said that the losses, which will be released in the coming weeks, are related to operational costs at casino properties.
According to the analysts, the results “could provide a glimpse into operating expenses (fixed costs), who amongst the casino operators managed to reduce costs the most, and what proportion of the cut is sustainable.”
In a note issued yesterday, analysts Praveen Choudhary and Gareth Leung said they forecasted losses of $286 million and $205 million for the quarter for Sands China and Melco Resorts & Entertainment respectively.
Morgan Stanley also said in the note that the daily operating expenses of the city’s six gaming operators may have dropped by 21% year-on-year to a total of $15 million.
Initially, Morgan Stanley estimated that Sands China Ltd had the highest daily operating expenses during the second quarter, amounting to $4.3 million, followed by Galaxy Entertainment Group Ltd which recorded daily expenses of $2.9 million in the reporting period.
Other gaming operators may report daily operating expenses of less than $3 million, including Wynn Macau, which is estimated to operate at $2.6 million daily and Melco Resorts and Entertainment Ltd at $2.2 million.
MGM China Ltd and SJM Holdings Ltd were estimated to operate at $1.6 million and $1.3 million respectively.
Morgan Stanley noted that the “market believes the worst is behind us and pent up demand and removal of overseas destinations as a choice could drive upside to estimates.”
“While Q2 numbers may not provide [insight into] when the travel restrictions will be lifted or how big 2021 could be, it can answer two questions: (1) who controlled costs the most, and (2) who lost the least as a percentage of Enterprise Value,” said the group.
Last month, Macau’ gross gaming revenue dropped 97% year-on-year, falling to a yearly low of just MOP716 million.
It was the fifth consecutive month that gaming revenue plummeted, followed by the 93.2% and 96.8% drop in May and April respectively.