Macau gaming bonds have come under pressure following the announcement of steep reciprocal tariffs on Chinese imports by US President Donald Trump, effective from April 10th.
According to CreditSights, the heightened trade tensions have contributed to a notable widening in bond spreads across both investment-grade and high-yield issuers in the sector, reflecting market concerns about the Macau gaming operators.
Friday’s investment memo shows that from April 2nd to 4th—immediately after the tariff announcement—investment-grade bonds issued by Sands China saw spreads widen by 19 to 25 basis points, while high-yield Macau credits widened by 37 to 77 basis points. The trend continued the following week, with further widening of 76 to 137 basis points for Sands China and 110 to 258 basis points for high-yield issuers, excluding bonds maturing in 2025.
Commenting on the broader impacts, analysts view the Macau gaming sector as primarily domestically oriented, with 73 percent of visitors in February 2025 coming from mainland China.
In this context, CreditSights believes the market reaction reflects wider concerns about geopolitical instability and weakened global sentiment. These risks—particularly following Trump’s “Liberation Day” remarks and related headlines—could weigh on consumer confidence and spending behavior.
Despite current market volatility, CreditSights maintains a stable view of the sector’s fundamentals, projecting China’s GDP growth at 4.7 percent in 2025, above the consensus of 4.5 percent. However, the firm cautions that downside risks to this outlook have increased amid the broader global economic slowdown.
2024 wrap
Macau’s gaming operators recorded solid year-over-year revenue growth in fiscal year 2024, though this topline expansion generally outpaced EBITDA growth, leading to margin compression across much of the sector.
Analysts identified MGM China as a standout, becoming the only operator to exceed pre-pandemic 2019 levels in both total revenue and EBITDA.
In 4Q24, most operators—including Sands China, MGM China, Wynn Macau, and Melco—posted higher revenues compared to the same period in the prior year. Sands China was an exception, impacted by ongoing Phase II renovations at The Londoner.
Despite revenue gains, all operators reported year-over-year declines in EBITDA in 4Q24. Weaker performances at properties such as MGM Cotai, Wynn Macau, Altira Macau, City of Dreams Macau, and Mocha Clubs, along with increased staffing costs and continued asset upgrades—particularly at The Londoner—contributed to the EBITDA decline and sector-wide margin contraction.
On a full-year basis, all six operators reported growth in both revenue and EBITDA. High-yield names saw double-digit increases, while Sands China delivered more modest mid- to high-single-digit gains. However, analysts noted that the pace of growth in 2024 moderated compared to the strong rebound in 2023, following the lifting of pandemic-related restrictions in Macau.
2025 outlook
CreditSights expects modest topline growth for most Macau operators, driven by steady GGR, stable market share, and new non-gaming offerings. However, the pace will likely be more moderate than in FY2024.
EBITDA margin outlooks vary: Sands China may improve as renovations wrap up, while MGM China is expected to hold steady with possible upside. Melco may post low- to mid-single-digit EBITDA growth, though margins could remain pressured. Wynn Macau may see slight declines as it prioritizes profitability.
EBITDA likely to have fallen 6% in 1Q25
In a separate investment memo from Citigroup, with 1Q25 earnings approaching, analysts expect Macau’s gaming operators to report a 6 percent year-on-year decline in combined industry EBITDA to around $1.92 billion. Analysts George Choi and Timothy Chau attribute the drop to higher operating expenses, particularly from new supply additions such as Sands China’s The Londoner Macao, and less favorable hold for some operators.
This comes despite steady GGR at MOP57.7 billion ($7.2 billion) and stable player reinvestment levels. Citi also noted that 1Q24 had a high EBITDA base, supported by early-stage renovations and major events like a Bruno Mars concert.
The bank forecasts a slight decline in industry EBITDA margin to 26 percent, down from 28 percent in 1Q24. Only Melco and MGM China are expected to post year-on-year EBITDA growth. Sands China is projected to see the largest drop, down 13 percent to $530 million.
Market share shifts are expected to be minimal, with Melco gaining 0.7 percentage points and Sands losing 0.5.
