Analysts at Morgan Stanley are raising their estimates on 1Q23 mass gaming revenue for Macau’s six gaming concessionaires by 200 percent quarter-on-quarter to $3.4 billion, reaching 63 percent of 1Q19 levels.
The brokerage expects the total visitation to Macau will be up 240 percent quarter-on-quarter to over 50,000 visitors daily. The figure amounts to 43 percent of the 1Q19 level. Based on the previous estimates, the research team believes that “at this level of mass revenue, the industry should be making positive EBITDA and free cash flow to equity (FCFE)”, said in the latest report.
Under its new 10 years gaming concession, starting this January, Morgan Stanley believes that MGM, Wynn and Galaxy may have better EBITDA recovery in 1Q23e vs. their peers. Especially MGM China and Wynn Macau will be mass market share gainers in 1Q23 notes the firm, with better mass market share translating into better EBITDA recovery.
“MGM China will be helped by its 200 more tables from 2023 (+40 percent vs. 2019), while Wynn Macau reported 2M23 GGR market share at 15 percent (13 percent in 4Q22, 16 percent in 1Q19). MGM China reported 16 percent GGR market share in January, while in 1Q19, the figure was only 9 percent”.
EBITDA recovery
Morgan Stanley estimates MGM China and Wynn property EBITDA at $97 million (47 percent of 1Q19) and $148 million (38 percent of 1Q19) respectively, however analysts predict that MGM’s operating expenses (opex) could be much higher than its peers. At the same time, analysts think that Galaxy will have the highest EBITDA recovery rate, at 50 percent of 1Q19, enabled by its better cost controls and non-gaming segments.
Regarding free cash flow, “we expect all operators except MLCO and SJM will be generating positive FCFE in 1Q23. While no bonds are maturing in the next 18 months, Wynn Macau’s issuance of $600 million convertible bonds could lead others to follow suit, due to commitment for non-gaming capex, higher interest rate and higher bond yields”.
All six concessionaires have pledged strong non-gaming investment over the 10-year contracts, with companies this month set to announce their investment plans for the year to the government.
