Robust Q4 projected for Macau casino industry

Lea Hogg January 2, 2024

The Macau casino industry is gearing up for a stellar fourth quarter in 2023, with a projected 10 percent sequential rise in Earnings Before Interest, Taxation, Depreciation, and Amortization (EBITDA), according to a recent note from JP Morgan Securities (Asia Pacific) Ltd. The positive outlook suggests a promising recovery for the region, surpassing pre-Covid levels and reflecting the resilience of Macau’s gaming sector.

JP Morgan’s optimistic projections

JP Morgan anticipates a robust performance in the final quarter of 2023, driven by a 10 percent quarter-on-quarter growth in industry EBITDA. This optimistic forecast follows an 80% recovery in December Gross Gaming Revenue (GGR), signalling a strong finish to the year. The analysts expect the industry to reach approximately 85 percent of pre-Covid levels, showcasing the sector’s ability to rebound.

Operating costs under scrutiny

While the outlook is positive, JP Morgan acknowledges the recurring challenge of operating costs and moderating margins. Investors are likely to scrutinize these aspects, especially in the context of modest margin disappointments observed in the third quarter. Despite this, the analysts assert that overall trends remained stable quarter-on-quarter, providing a foundation for sustained growth.

Macau’s economic recovery

The year 2023 closed on a high note, with December GGR witnessing a remarkable 16 percent month-on-month increase and an impressive year-on-year surge of 433 percent. This robust performance exceeded market consensus, reaching MOP18.6 billion and boasting a daily run-rate of MOP599 million. The recovery rate surpassed 80 percent, a notable milestone since the normalization of travel to the Chinese mainland, Macau, and Hong Kong in January 2023. Looking ahead, JP Morgan projects a 2024 Macau GGR industry-wide of approximately US$27.3 billion, indicating continued growth. The positive trajectory is crucial as Macau’s six casino firms aim to fulfil their commitment to increase non-gaming and overseas-marketing spending by at least 20 percent, following the city’s annual GGR surpassing MOP180 billion in 2023.

Record-high mass revenue

JP Morgan notes that Macau’s casino operators recorded record-high mass revenue in the fourth quarter of 2023, with headline GGR growing by 11 percent quarter-on-quarter. Mass GGR rose by an estimated 12 percent to 13 percent, reaching an all-time high of MOP48.6 billion and surpassing pre-Covid levels for the first time since reopening. This remarkable achievement, coupled with the positive trends observed, paints a promising picture for Macau’s gaming industry in the coming months.

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