Macau’s fourth-quarter revenue is expected to grow, driven by Melco Resorts, Wynn and others
Fourth-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) at the six Macau franchises are expected to rise a combined 6%, led by SJM Holdings and Wynn Macau.
That's what Citi analysts George Choi and Ryan Cheung say. In a new client note, the pair noted that Sands China and Galaxy Entertainment, Macau's two largest operators, could lose market share in the final three months of 2023. But rivals benefited from the decline.
While we expect most of the market share changes in Q4 to be attributed to luck, recent market share gains will likely translate into more stable EBITDA margins for MGM China, Melco Resorts, Wynn Macau and SJM , which in turn should translate into close to... "Short-term share price outperformance," Citi analysts wrote.
Wynn Macau is a subsidiary of Wynn Resorts (NASDAQ: WYNN), while Sands China is controlled by Las Vegas Sands Corporation (NYSE: LVS). MGM Resorts International (NYSE: MGM) owns approximately 56% of MGM China.
Macau Recovery in 2024
Operators including Wynn Macau will have total revenue of $22.7 billion in 2023. This is still well below the peak of $36.3 billion in 2019, indicating that there is still plenty of room for further recovery in the Special Administrative Region (SAR) this year.
In particular, Lawrence Ho's Melco Crown Entertainment Group (NASDAQ: MCLO ) and Wynn Macau have quickly moved away from VIP focus, which is an advantage at a time when Macau's junket industry remains in trouble. In addition, both companies benefit from serving prime mass gamblers, who analysts say are more resilient than standard mass gamblers.
"We expect the industry's EBITDA margin to remain broadly stable at around 28.5% in the fourth quarter of 2023 compared with the previous quarter," Cheung and Choi added. "At the individual operator level, we see quarterly fluctuations in EBITDA margin It has more to do with changes in operator market share during the quarter than with player reinvestment spend."
Citi analysts predict that Grand Lisboa operator SJM and Wynn Macau will be the Macau franchises with the biggest improvement in EBITDA in the fourth quarter.
Citigroup is optimistic about Macau stock market
Macau casino stocks enter 2024 at a deep discount after posting dismal results last year. In 2023, only MGM China achieved positive returns, while the other five franchisees all experienced double-digit declines.
Macau gaming stocks have become so cheap that some analysts believe the asset class is priced to reflect a severe recession or depression-like scenario, which is unlikely to materialize. Those cuts are one reason some analysts are bullish on Macau's stock market.
Citigroup raised its target prices for Melco Crown, MGM China, SJM Holdings and Wynn Macau, while reaffirming its long-term bullish view on Galaxy and Sands China.
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Source: www.casino.org
