In the second quarter of 2024, Macau’s casino industry faces pivotal forecasts amidst shifting market dynamics. Investment bank Morgan Stanley has cautioned that consensus estimates of Property EBITDA might be overstated for key operators.
Current Market Trends
Recent data indicates a challenging landscape for Macau’s gaming sector. Quarter-on-quarter, there has been a noted decline in mass gaming revenues. Analysts from Morgan Stanley, including Praveen Choudhary, Gareth Leung, and Stephen Grambling, underscore that this downturn, compounded by escalating operational costs, could exert downward pressure on operators’ profitability metrics. Their insights suggest a cautious approach is warranted despite prevailing optimism in some quarters.
Sands China:
Facing potential setbacks due to disruptions at The Londoner Macao, Sands China is expected to experience notable declines in both Gross Gaming Revenue (GGR) and EBITDA. The ongoing construction issues have likely eroded its market share in the mass gaming segment.
Galaxy Entertainment Group:
Contrasting the broader trends, Galaxy Entertainment Group is poised for a robust quarter with anticipated EBITDA growth of 9%. This favorable outlook stems from the successful ramp-up phase of Grand Lisboa Palace, bolstering its operational performance.
SJM Holdings:
SJM Holdings is also projected to achieve significant quarter-on-quarter EBITDA growth, estimated at 8%. The positive momentum is attributed to the progressive integration of Grand Lisboa Palace into its portfolio.
MGM China:
Despite challenges, MGM China remains resilient with a projected 16% drop in EBITDA. Analysts believe the market sentiment might be overly pessimistic towards its performance, suggesting potential undervaluation.
Wynn Macau and Melco:
Both Wynn Macau and Melco are expected to face declines in EBITDA, with estimates indicating drops of 11% and 4%, respectively. These projections align with broader market expectations and have already factored into their stock valuations.
Strategic Recommendations
Morgan Stanley maintains a selective stance on Macau casino stocks. They highlight Galaxy Entertainment Group as a preferred option due to anticipated market share gains, while also expressing confidence in MGM China despite prevailing market concerns. This strategic advice reflects their nuanced assessment of the sector’s current challenges and opportunities.
The second quarter of 2024 presents a mixed outlook for Macau’s casino operators. While some, like Galaxy Entertainment Group and SJM Holdings, are poised for growth amidst strategic expansions, others face headwinds driven by operational disruptions and market volatility. Morgan Stanley’s cautious stance underscores the importance of informed investment decisions amid evolving industry dynamics.