Macau Casino Income Guesses Might Be Overly Conventional, Contends Expert
After a successful May in Macau, where the concessionaires achieved the highest GGR since before the pandemic began, certain analysts believe the revenue predictions for these operators might be underestimated.
Last month, the six Macau concessionaires accumulated $2.5 billion in GGR, which resulted in a 9% increase from the previous month, a 30% year-over-year rise, and a figure that was 22% lower than that of May 2019. Analysts anticipated that the GGR in May 2024 would be 24% lower than the prior five-year period. However, Macquarie analyst Chad Beynon noted in a report to his clients that with a solid May performance, the Wall Street GGR projections for Macau operators might be too low.
According to Linda Huang, Macquarie's Head of Asia Consumer Research, the sequential decline in May compared to 2019 was probably due to the more conservative promotional environment in the second quarter (including events like referral players) getting better, which would be beneficial for Galaxy and Sands China. Huang believes that the positive momentum for Macau's GGR growth is still in place post-May's results.
Visits to the Asian gaming center increased yearly in the ten years leading up to 2019, peaking at 39.40 million in that year. However, in 2023, the number of annual visits was 28.21 million. This suggests that there is still a considerable path back to pre-pandemic norms, and if those norms are achieved, Macau gaming equities could profit.
Macau Casino Revenue: No Cause for Pessimism in June
In terms of casino stocks that frequently slump in June, there are predictions for another outstanding GGR exhibition in Macau this month.
Beynon reckons that Macau concessionaires could amass $2.3 billion in GGR in June collectively, implying a second-quarter GGR of $7.2 billion. If this projection holds, it would indicate a 22% decline from the same period in 2019.
Beynon maintains that operators who are transitioning to catering to mass-market clients and non-gaming features could fare better. Wynn Macau, a Wynn Resorts (NASDAQ: WYNN) asset, boasts significant non-gaming capabilities and is reducing its focus on VIPs.
"With additional operator revenue growth in mass and nongaming," notes Beynon, "we project a margin increase despite higher concessionaire commitments." Overall, he believes the consensus is too conservative, specifically for Wynn, which he believes could gain market share. Beynon stays optimistic about the long-term growth prospects for Macau, ranking it highly.
Optimistic About Wynn, Las Vegas Sands, MGM
Wynn Resorts, Las Vegas Sands (NYSE: LVS), and MGM Resorts International (NYSE: MGM) are the other U.S.-based Macau operators. Beynon is favorable towards all three companies along with Wynn. He assigns them all the rating of "outperform" and price targets suggesting an average upside of 32.3%.
This is particularly important for Sands investors because the firm currently has no Las Vegas exposure, in contrast to MGM and Wynn.
"As a reminder, based on minority ownership, casino revenue is composed of the following": WYNN (39% Macau, 44% Vegas, 17% Regions), LVS (57% Macau, 43% Singapore), and MGM (11% Macau, 62% Vegas, 27% Regions), stated Beynon.
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