In a recent note, investment bank Citi provided a comprehensive analysis of the performance of Macau’s gaming concessionaires for the second quarter of 2024. Despite facing challenges such as a slight decline in gross gaming revenues (GGR) and profitability, the aggregate EBITDA margins for the six major casino operators remained robust at approximately 28%. This resilience is notable amidst ongoing renovations and subdued retail sales affecting overall revenue.
Overview of Key Metrics
According to Citi analysts George Choi and Ryan Cheung, the industry’s EBITDA is estimated to have decreased by around 5% quarter-on-quarter, reaching US$1.95 billion. Concurrently, GGR saw a modest decline of 1.6% quarter-on-quarter to MOP$56.4 billion (approximately US$7.0 billion). The marginal decrease in GGR was largely offset by weaker retail sales, resulting in an overall revenue drop of 3% compared to the previous quarter.
Despite these challenges, the aggregate EBITDA margin of 28% underscores the efficient management of operational costs and strategic reinvestment strategies by the casino operators. This margin also reflects the impact of ongoing renovations at The Londoner Phase II and subdued retail performance on overall profitability.
Operational Performance of Leading Players
Citi’s analysis highlights Galaxy Entertainment Group and Melco Resorts & Entertainment as notable gainers in market share during Q2 2024. Galaxy’s market share is projected to increase from 17.3% to 19.1%, driven by enhancements in marketing strategies and a more adaptable approach to player reinvestment. Similarly, Melco Resorts is expected to expand its share from 14.3% to 14.8%, buoyed by improved performance at its flagship property, City of Dreams.
Strategic Outlook and Catalysts
Looking ahead, Citi has identified Galaxy and Melco as potential outperformers in the upcoming quarters, citing anticipated improvements in EBITDA performance compared to their peers. The bank has placed a positive catalyst watch on both companies, anticipating enhanced operational efficiencies and strategic initiatives to drive growth.
Despite facing headwinds such as renovation disruptions and softer retail sales, Macau’s gaming sector has demonstrated resilience in maintaining strong EBITDA margins. The strategic focus on efficient cost management and targeted reinvestment strategies has been pivotal in mitigating broader industry challenges. Looking forward, the performance of key players like Galaxy Entertainment Group and Melco Resorts & Entertainment will be closely monitored for their ability to capitalize on market dynamics and deliver sustained profitability.