Morgan Stanley forecasts 12% Macau gaming revenue growth, 17% surge in operators' EBITDA in Q3

Macau's gross gaming revenue (GGR) is expected to grow by 12% quarter-on-quarter in Q3, along with a 17% increase in gaming operators' EBITDA, according to a recent update from brokerage firm Morgan Stanley.

The report projects that, excluding MGM, gaming operators' EBITDA is likely to reach around 80% of 2019 levels during the third quarter. MGM is predicted to surpass this benchmark, reaching 120% of its 2019 levels, Macau Business reported.

As for other forecasts, despite the availability of 15% more hotel rooms compared to 2019, the total employee count is projected to remain 5-10% below pre-pandemic levels during the quarter.

Morgan Stanley analysts observe increased foot traffic on casino floors compared to June, with minimum bets demonstrating resilience and a return to pre-Covid levels. Although casino junkets are slowly making a comeback, their recovery is expected to be gradual due to factors such as profit challenges resulting from the ban on revenue sharing, the use of sub-agents, and operators' cautious approach to resuming junket operations.

Notably, high-end customers are spending at, or even exceeding, pre-Covid levels, as highlighted by analysts Praveen K. Choudhary and Gareth Leung in the report. The top 1% of mainland Chinese individuals are continuing to travel and spend on entertainment, it stressed.

As per the Macau Business report, Morgan Stanley notes that both visitation and revenue figures for July and August have remained robust, with no observable indications of a slowdown. The influx of leisure demand during the summer holidays has significantly contributed to this positive trajectory, remaining unscathed despite a slowdown in China’s macroeconomic growth.

The majority of hotel rooms within Macau's casino resorts were operational during the second quarter, suggesting less incremental growth in operating expenses for the remainder of the year. This, in turn, is expected to result in substantial operating leverage across the board.

Macau's economy is steadily rebounding in the aftermath of the COVID-19 pandemic. During July, Macau experienced a notable influx of visitors, with 2,759,544 arrivals recorded, showcasing a substantial rise of 24.5% compared to the preceding month. As per data provided by the Statistics and Census Service, July’s visitor traffic is equivalent to 79% of what was recorded in the pre-COVID July of 2019.