Following Citigroup’s Macau Gaming Corporate Day, where all six casino operators were hosted, the investment bank maintains a bullish stance on Macau gaming companies’ outlook.
Noting that operating expenses (opex) are largely stabilizing, Citigroup anticipates that operating leverage will come into play, leading to a reacceleration in EBITDA growth.
In an investment memo released on Tuesday, Citigroup shared insights gathered from the operators’ management. It summarizes that Macau’s gross gaming revenue (GGR) is still expected to grow.
The new Individual Visit Scheme (IVS) cities are anticipated to drive further visitation growth, and affluent visitors continue to demonstrate willingness and ability to spend. Additionally, the implementation of smart table technology is expected to contribute positively.
Galaxy market share already bottomed
Citigroup observes that Galaxy‘s market share seems to have reached its lowest point in 1Q24, currently nearing about 20 percent.
Management attributes this to several factors: increasing the number of hosts from 180 to 300 by the end of February (showing positive impact from April onwards), gaming floor reconfiguration at Galaxy Macau, offering flexibility for player reinvestments with respect to high-end Premium Mass players, and introducing new side bets.
Meanwhile, management reaffirmed its rollout plan for smart gaming tables, scheduled to commence in July and culminate in a full launch across Galaxy Macau and StarWorld by the end of 2024. Additionally, future growth is anticipated from Capella, set to open in mid-2025, targeting the super Premium Mass segment.
MGM confident in remaining market share
Analysts George Choi and Ryan Cheung note that, despite being allocated 750 tables, MGM China’s management remains confident in maintaining market share in the mid-teens.
The statement adds that margins can be sustained at the high-20s, despite relatively small retail space compared to competitors. MGM management emphasized to the investment bank that the company remains disciplined in player reinvestments.
Citigroup mentions that while smart tables have contributed, they were not a game-changer. Ultimately, understanding customer needs and constantly refreshing properties to cater to those needs are keys to success in garnering market share.
Sands’ hotel room inventory expected to decrease further in 2Q24 and 3Q24
In the latest update, Sands China’s $1.2 billion Londoner Phase II project and Sheraton hotel renovation works have commenced, involving approximately 500-600 rooms in 1Q24. Completion is expected in phases from the end of 2024 to May 2025.
In this context, the number of rooms in the inventory is expected to increase further in 2Q24 and 3Q24, implying more significant disruptions compared to 1Q24. Renovation at the Pacifica casino has recently commenced. Management remains confident that the reopening of Londoner Phase II next year will help Sands regain market share.
Melco’s opex to increase to pre-COVID levels, but still reasonable
Citigroup indicates that Melco management believes the firm will benefit from the newly added IVS cities and the introduction of Macau-Hengqin multi-entry visas. Melco will roll out smart gaming tables in phases beginning in 3Q24, with full implementation by early 2025.
The revamp of City of Dreams and the centralized sales force, which aims to optimize synergy between City of Dreams and Studio City, is expected to help the company ‘gain market share going forward’.
Melco’s opex could increase to pre-pandemic levels, to about $3 million per day, compared to the current approximately $2.7 million per day, but analysts consider this increase ‘still reasonable,’ given the increased capacity at Studio City Phase 2.
Meanwhile, the memo also mentions recent management changes, indicating that the “Melco” service is now back, evidenced by the reconfigured gaming floor and the improving table yield.
Wynn confident in premium mass
Wynn is confident that its best-in-class product and service standards will continue to strongly appeal to premium mass players within the marketplace, even as competitors add capacity.
Citigroup notes that Wynn has added innovative event programming (eg recent golf tournaments, snooker tournaments, wine events, and awards). Wynn remains disciplined in managing its promotional and operating costs, as evidenced by its recent margins, and has been successful in maintaining a strong market share. Wynn Macau does not have a set dividend payout ratio, but ‘management aims to provide investors with dividend stability and predictability over time.’
Grand Lisboa Palace to gain market share
Regarding SJM, the Grand Lisboa Palace (GLP) is expected to further gain market share through better connectivity between Grand Lisboa and GLP, an expansion of the marketing team, and more retail tenants.
SJM revealed that shuttle buses and limos are transporting 3,000-5,000 people from Grand Lisboa from Macau Peninsula to GLP per day. The operator sets a target to reach 90 percent occupancy at GLP by end-2024.
‘Management sees upside potential in SJM’s self-promoted casinos’ EBITDA margin from the current level of about 22.5 percent, to be driven by the ramp-up of GLP and enhancements at Grand Lisboa.’
‘Self-promoted casinos’ market share gain has been offsetting market-share loss at satellite casinos. SJM will roll out smart gaming tables in phases beginning 4Q24 and expects full implementation by 4Q25,’ it adds.
