Macau Casinos 3-year EBITDA Gain at Risk

According to the predictions coming from JP Morgan Securities (Asia Pacific) Ltd analysts…

…casinos in Macau could see a negative EBITDA (earnings before interest, taxes, depreciation, and amortization) for the first time in the past three years.

The analysts are not that positive about this issue, because according to them, there isn’t any for positive gains in the near future.

A Word from the Analysts

“For the first time in three years, we forecast industry EBITDA to print negative growth both quarter-on-quarter and year-on-year in the first quarter to second quarter of 2019, driven not only by anaemic GGR [gross gaming revenue] momentum (expected), but also by relatively soft margins (lesser-known),” JP Morgan analysts, DS Kim, and Sean Zhuang, commented.

Both of them also added that in the past nine months, the gaming industry margins in Macau have deteriorated…

…although the market had “higher top-line” earnings and improved revenue.

More Predictions

According to analysts, in the GGR ,there won’t be any positive gains any time soon. The growth comparison during the months of March and April was, as they stated, “very tough given unfavorable calendar year-on-year.”

They added, “The impact of rising operating expense could be felt more acutely this year, where top-line growth will likely slow materially to flat to negative (versus +14% in 2018).”

Other factors also affected their opinion on this matter. For example, the spring dinners that junket operators hold and that increase a volume of VIP players…

…were a total fail in February of this year, comparing to last March.

Also, Labor Day holiday this year begins on May 1, which is a Wednesday, while last year it started on April 29, which was a Sunday.

First Quarter Earnings

For the gaming industry in Macau, where Hotel Wynn was announced the only resort in the world with a total of eight Forbes five-star awards…

…earnings in the first quarter, according to the analysts, “could print negative growth (albeit small) for the first time in three years.”

“We sense that a short-term breather is coming for Macau stocks,” the duo also added.

When it comes to the full 2019 predictions, the JP Morgan analysts reiterated the previous GGR forecast and expect it to come in at -1%…

…while the growth will fully recover during 2020.

“We keep our industry GGR assumptions unchanged at -1% for full-year 2019, with +5% growth in mass, versus – 7% decline in VIP. We assume GGR growth will recover in full-year, led by +9% in mass and +7% in VIP, amidst the opening of SJM’s Grand Lisboa Palace (and to a lesser degree Galaxy Macau Phase 3),” the analysts explained.

Source:

“Macau’s 3-year casino EBITDA gain at risk, says JP Morgan Securities”, Erik Gibbs, calvinayre.com, March 6, 2019.