Morgan Stanley predicts decline in Macau's Q2 mass-market gaming revenue

Morgan Stanley predicts a decline in Macau's mass-market gross gaming revenue (GGR) for Q2 2024, with potential downside to earnings expectations for casino operators. The banking group forecasts a 2% to 3% quarter-on-quarter drop in mass-market GGR, highlighting ongoing challenges in the industry.

GGR for June could drop by up to 11% month-on-month, reaching MOP18 billion ($2.23 billion), Macau Daily Times reported. This follows May's strong performance, the best monthly GGR since early 2020.

This view aligns with a June 10 report from brokerage CLSA Ltd, noting that player rebates and other player reinvestments in Macau’s casino market have been growing faster, percentage-wise, quarter-on-quarter than market-wide GGR.

In Q1 2024, revenue from mass-market baccarat reached nearly MOP34.59 billion ($4.3 billion), a 3.1% sequential increase, representing approximately 60.3% of market share. The mass-market segment, including slot machines, accounted for 74.9% of Macau’s total casino GGR.

Morgan Stanley's research indicates that overall Macau GGR is tracking down 1% to 2% quarter-on-quarter in Q2.

“Consensus expects second-quarter property EBITDA at USD2.1 billion (+2% quarter-on-quarter, -2% quarter-on-quarter on a hold-adjusted basis),” Morgan Stanley said, adding that it sees “downside to this number,” the report said.

The analysts provided specific forecasts for Macau’s six casino concessionaires. They anticipate the most downside for Sands China’s EBITDA due to ongoing construction at The Londoner Macao but expect Galaxy Entertainment Group and SJM Holdings to achieve EBITDA growth of 9% and 8%, respectively.

This analysis comes as Macau's casino market continues its recovery from the COVID-19 pandemic. While the mass-market segment has been strong, potential GGR declines and rising costs could impact operators' bottom lines in Q2.