Macau’s 2024 gross gaming revenue (GGR) is likely to be up 34 percent from 2023, according to the brokerage CLSA, which says the forecast is 3.5 percent higher than its prior estimates after a positive Chinese New Year (CNY).
According to the investment memo, CLSA notes that the latest projections suggest Macau’s GGR will reach $30.3 billion this year, followed by a 5 percent increase to $31.9 billion in 2025.
Analysts indicate that increasing the GGR forecast aligns with raised visitation assumptions for the traditionally slack months, which ‘have proven to be resilient in 2024 so far’.
Meanwhile, gaming operators’ EBITDA forecast is lowered 1-3 percent due to the gradual normalized recovery and the disruption from the revamp of Londoner Phase 2.
‘We expect the sector’s EBITDA to be 8 percent below 2019’s level in 2024, but to be 1 percent below 2019’s level by 2025. We still factor in minimal sequential margin expansion.’
In the first quarter of the year, Macau’s visitations and GGR continued to recover. The GGR in the quarter reached 75 percent of 1Q19’s level. Visitations in February reached 93 percent of the same month’s level in 2019.
Analysts Jeffrey Kiang and Leo Pan indicate that the gaming industry has seen an increase in completions, as all the operators have shown plans to introduce smart gaming tables this year, while ‘the sector’s balance sheet strength has improved, as net debt declined 4 percent year-over-year in 2023. MGM China and Wynn Macau have already resumed dividends, which surprised investors.’
MGM and Sands with strongest balance sheets
CLSA note that as Macau gaming companies gradually resume dividends, the operators with solid balance sheets and free cash flow (FCF) from recurring operations are preferred. ‘Apart from Galaxy, we still believe MGM China and Sands China have the strongest balance sheets.’ The estimates are based on the companies’ net debt to EBITDA.
MGM China remains the best positioned in 2024 and 2025, ‘as we forecast recurring FCFE to reach $744 million in 2024 and $531 million in 2025, which is the highest level since 2013.
‘Sands China should reap the rewards from revamping Londoner Phase 2 from 2025’
According to the CLSA, Sands China’s recurring FCFE is expected to be $1.9 billion in 2025 and $2.8 billion in 2026. The estimates are 5 percent and 53 percent above 2019’s level, respectively.
