Morgan Stanley: Macau’s second quarter EBITDA may exceed US$1.6 billion, MGM China’s top choice
The Macau casino operator's earnings before interest, taxes, depreciation and amortization (EBITDA) were likely to hit $1.6 billion in the second quarter ended Friday.
The forecast, from Morgan Stanley analysts Praveen Choudhary, Gareth Leung and Stephen Grambling, expects Special Administrative Region (SAR) EBITDA figures to grow 46% in the first three months of 2023.
Spending per visitor is 50% higher than 2019 levels. Further upside to VW revenue could come from a resurgence in package tours, travel to provinces away from Macau and increased ferry and air travel capacity," analysts said in a recent note to clients.
In an increasingly common theme, Morgan Stanley analysts highlighted summer concerts across Macau's integrated resorts as a catalyst for higher EBITDA and gross gaming revenue (GGR).
MGM China’s Best Creativity
The six Macau franchisees are Galaxy Entertainment, Melco Crown Entertainment (NASDAQ: MLCO), MGM China, Sands China, SJM Holdings and Wynn Macau.
MGM Resorts International (NYSE: MGM ), which owns 56% of MGM China, is Morgan Stanley's top pick among Macau casino stocks. The research firm highlighted the operator's addition of new gaming tables at two venues in Macau, which could increase its market share among mass and premium mass punters.
"We expect MGM's mass market share to reach 13% by 2024 and possibly 14% to 15% in the second quarter (versus 16% in the first quarter)," Choudhary, Leung and Grambling wrote. "This This means that volume sales in 2024 will be at least 30% higher than in 2019, even if we assume that the industry's volume sales do not increase compared to 2019."
Analysts added that their expectations for MGM China's 2024 EBITDA are 30% higher than the operator's 2019 levels, while consensus estimates are just 10% higher than pre-pandemic levels, suggesting that Operators may not get the credit they deserve for their profit growth. .
"We forecast industry sales to reach 115% and 125% of 2019 levels in 2024 and 2025, respectively," the analysts noted.
Melco Crown and Wynn also have upside potential
Franchises such as Melco Resorts and Wynn Macau are likely to post windfall gains in the second quarter as these operators launch new facilities in the June quarter.
Wynn Macau renovates its namesake hotel, while Melco Crown could benefit from summer concerts and the debut of Studio City II's indoor water park and EPIC Tower. Galaxy and Sands, on the other hand, may have lost marginal market share during the quarter as they were unable to sell their entire hotel room supply. Morgan Stanley expects conditions to improve between July and September.
The bank said increased hotel room supply is likely to improve EBITDA and GGR forecasts for the third and fourth quarters.
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Source: www.casino.org
