Analysts from Morgan Stanley estimate the average yearly spend for non-gaming diversification by the Macau SAR concessionaires over their 10-year concession term will be around 20 percent of EBITDA volume estimated for 2024.
Under their new 10-year concessions, which commenced January 1st, the gaming companies have already pledged to spend in aggregate MOP108.7 billion ($13.5 billion) on non-gaming and exploring overseas tourist markets. The figure comprises more than 91 percent of their total pledged investment under the 10-year licenses.
The six gaming operators will be required to increase non-gaming investment by around 20 percent of their initial pledge if Macau’s annual gross gaming revenue reaches MOP180 billion ($22.45 billion) by 2027.
According to Morgan Stanley analysts the Macau gaming industry will require mass revenue at 120 percent of 2019 to get back to 100 percent EBITDA due to ‘higher gaming tax, lost VIP revenue and slower slot recovery’.
‘Yet, more operating leverage benefits could kick in once we pass the 100 percent EBITDA mark,’ the brokerage noted.
All six gaming concessionaires reported positive EBITDA results in the second quarter of this year, however only MGM China showed results above the same period in 2019.
For Morgan Stanley, MGM has an advantage as it stands to ‘gain tables while Wynn and Melco will lose tables’.
Since January 1, 2023, the number of gambling tables and the total number of gaming machines in Macau were reduced by Macau authorities under the new gaming concessions to 6,000 and 12,000 respectively. With an additional 198 tables to add to its former allocation under the table cap, representing an increase of 36 percent, MGM was the only one of the six concessionaires to receive an increase in table allocation.
At the same time, under the new gaming law a minimum annual gross income from each gaming table was set at 7 million patacas ($866,122) while the figure for each gaming machine is 300,000 patacas ($37,120), the government said.
Such figures of minimum gross revenue guarantee a minimum level of tax for the government, with the operator having to make up the gap if revenues fall short.
The number of estimated gaming tables allocated to the six gaming operators currently stands as the following: Sands (1,680), Galaxy (1,000), Melco (750) Wynn (570), MGM (750), and SJM (1,250).