Macau Casino Revenue Estimates Could Be Too Conservative, Says Analyst

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Following a strong showing in May in which Macau concessionaires posted the best monthly gross gaming revenue (GGR) tally since prior to the start of the coronavirus pandemic, some analysts believe revenue estimates for operators there could be too conservative.

The Galaxy Macau casino resort on the Cotai Strip. An analyst believes GGR estimates there are too restrained. (Image: Bloomberg)

Last month, the six Macau concessionaires combined to generate $2.5 billion in GGR, representing a 9% sequential gain, a 30% year-over-year jump and a figure that was 22% below the May 2019 figure. Analysts expected May 2024 GGR to come in at 24% off the same period five years earlier. In a new report to clients, Macquarie analyst Chad Beynon noted that with a strong May in the books, Wall Street’s GGR estimates for Macau operators may be too restrained.

Linda Huang, Macquarie’s Head of Asia Consumer Research, noted in a recent report (link) that the seq decline in May vs 2019 was likely attributable to the quarter-to-date promotional environment (eg, referral player segment) becoming more rational, which would benefit Galaxy and Sands China. Bottom line, we believe the upward trajectory for Macau GGR growth remains intact post May’s result,” wrote the analyst.

Annual visits to the Asian casino center trended higher in the decade ending 2019, peaking at 39.40 million in that year, but in 2023, that number was 28.21 million. That implies there’s still a long runway for Macau operators to get back to pre-pandemic norms and, if that goal is achieved, Macau gaming equities could benefit.

Macau Casino Revenue: Don’t Expect June Gloom

In what could be beneficial to some casino stocks — an asset class with a propensity for sagging in June — expectations are in place for another strong GGR showing this month in Macau.

Beynon forecasts Macau concessionaires will generate, in aggregate, $2.3 billion in GGR this month, implying second-quarter GGR of $7.2 billion. Should that projection prove accurate, it’d represent a 22% decline from the same period in 2019.

The analyst notes operators that are pivoting to mass market clients and non-gaming amenities could benefit. Wynn Macau, a unit of Wynn Resorts (NASDAQ: WYNN), has strong non-gaming competencies and is decreasing its dependence on VIPs.

“With additional operator revenue growth in mass and non-gaming, we model margin upside despite higher opex concessionaire commitments,” notes Beynon. “Overall, we believe consensus remains conservative, particularly for WYNN, which we believe can gain share. We continue to be bullish on the long-term growth prospects for Macau and rank Macau.”

Bullish on MGM, Sands, Too

In addition to Wynn, Las Vegas Sands (NYSE: LVS) and MGM Resorts International (NYSE: MGM) are the other US-based Macau operators. Beynon is bullish on both names along with Wynn. He rates all three stocks “outperform” with price targets implying average upside of 32.3%.

That’s particularly noteworthy for Sands investors because that company currently has no exposure to Las Vegas unlike rivals MGM and Wynn.

“As a reminder, after factoring in minority ownership, casino revenue is comprised as follows: WYNN — 39% Macau, 44% Vegas, 17% Regionals; LVS — 57% Macau, 43% Singapore; and MGM — 11% Macau, 62% Vegas, 27% Regionals,” concluded Beynon.

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