Macau First-Quarter EBITDA Lumpy Disappointment, Say Analysts

Underscoring an uneven recovery in the world s largest gaming center, Morgan Stanley estimates first-quarter earnings before interest, taxation, depreciation and amortization (EBITDA) for Macau concessionaires slumped, while gross gaming revenue (GGR) increased.

US investors will get a sense for how Macau s rebound from the coronavirus pandemic is proceeding later this month, when Las Vegas Sands (NYSE:LVS) steps into the earnings confessional. Owner of five integrated resorts there, LVS is the largest operator in the special administrative region (SAR). Morgan Stanley projects combined EBITDA of $181 million for Macau operators in the first three months of this year.

This is 23-percent lower than fourth-quarter 2020 due to seasonality (weaker retail, hotel, and food and beverage revenues sequentially) and higher operating expense quarter-on-quarter as a result of uneven recovery in first-quarter 2021,” said a team of analysts from the bank.

They forecast aggregate GGR of $2.95 billion for the January through March period, reflecting momentum accrued of the quarter. If that number is on the mark, it s a 22.5 percent year-over-year decline, but an 8.3 percent jump on a sequential basis.

Likely weighing on first-quarter results in Macau are still-tepid levels of visitation by VIP gamblers.

That means mass and premium mass players are doing the heavy lifting for operators top and bottom lines. But among concessionaires, there isn t uniformity to that trend. For example, Galaxy Entertainment and LVS properties are favored among mass market players, while Meclo Resorts and Wynn Macau venues are know for attracting higher-end clientele. Analysts previously said it d be the mass and premium mass segments to until cross-border money transfer and travel restrictions ease.

“Many companies have highlighted that [GGR] growth was mainly driven by mass, especially premium mass, and that VIP remained sluggish,” said the Morgan Stanley analysts.

They estimate first-quarter VIP revenue dipped three percent in Macau, while mass market sales surged 11 percent.

With some marquee events still to come this year, including May Day , Macau s rebound hopes hang on easing travel restrictions. Policymakers on the mainland play an important role in that equation, particularly when it comes to making the individual visit scheme (IVS) visa application process more efficient.

In comments made during a question-and-answer session at the Macau Legislative Assembly, Chief Executive Ho Iat Seng said his government is working with Beijing on plans for a vaccination recognition system that would allow for increased travel between the mainland and the SAR.

The local government is encouraging residents to get vaccinated. As of today, just 20,000 of 683,000 locals have taken two doses of a COVID-19 therapy.