Macau casino industry fourth-quarter 2023 earnings before interest, taxation, depreciation and amortisation (EBITDA) are likely to show a 10 percent rise sequentially when reporting for the relevant period begins later this month, says a Monday note from JP Morgan Securities (Asia Pacific) Ltd.
The brokerage also flagged the recurring issue of operating costs and moderating margins.
“As we enter the Year of Dragon… we expect industry EBITDA to grow 10 percent-plus quarter-on-quarter to hit circa 85 percent of pre-Covid levels, versus 80 percent recovery in the third quarter,” wrote analysts DS Kim, Mufan Shi, and Selina Li, regarding the trading from the final three months of 2023.
But they added: “Investors will likely scrutinise operating expenses and [player] promotions/reinvestments given (modest) margin disappointments from the third quarter, but we believe overall trends remained largely stable quarter-on-quarter.”
The institution expects 2024 Macau GGR industry-wide to be circa US$27.3 billion, compared to the MOP183.06 billion (US$22.75 billion) in 2023.
The fact annual GGR passed the MOP180 billion threshold means the city’s six casino firms have to increase by at least 20 percent their collective MOP108.7 billion non-gaming and overseas-marketing spending pledges to the Macau government for the 2023 to 2032 period.
JP Morgan noted of 2023 that the year “closed strongly, with 80 percent-plus recovery in December GGR”.
They added: “December GGR was up 16 percent month-on-month (or +433 percent year-on-year, to MOP18.6 billion, handsomely beating the consensus of MOP17 billion to MOP17.5 billion and printing an impressive daily run-rate of MOP599 million, versus MOP531 million in the third quarter,” which was “almost comparable” to October’s MOP629 million.
JP Morgan observed it was also the first time since normalisation of travel to the Chinese mainland, Macau and Hong Kong in January 2023, “that the recovery rate hit over 80 percent… 81 percent to be exact… versus 70 percent to 75 percent recovery in recent months”.
According to the brokerage, Macau’s casino operators recorded “record-high mass” revenue in the fourth quarter of 2023.
“Headline GGR grew +11 percent quarter-on-quarter, doubling the historical seasonality of +5 percent growth, to hit MOP588 million a day that represents 75 percent of pre-Covid levels (versus 69 percent recovery in the third quarter),” said the JP Morgan team.
It added: “Importantly, we believe mass GGR rose +12 percent to 13 percent quarter-on-quarter to print an all-time high of MOP48.6 billion in fourth quarter, surpassing pre-Covid levels for the first time since re-opening and hitting 105 percent-plus of 2019 (versus 95 percent recovery in the third quarter).”