Mass Casino Revenue to Reach 120% of 2019 Level by Year-End: Morgan Stanley

MACAU, SAR (January 19, 2024) — Macau’s casino revenue from the mass market has the potential to reach 120 percent of the 2019 level by the end of 2024, a recent forecast by Morgan Stanley suggests.

According to the ‘Macau News Agency‘ analysts Praveen K Choudhary, Gareth Leung, CFA, and Stephen W Grambling highlighted in a recent note that the city’s gaming stocks fell by 15 percent overall last year. Despite industry EBITDA having recovered to 70 percent of pre-Covid levels, the decline occurred.

“The market worried Macau gaming revenue had peaked and might follow the decline in China consumption,” explained the analysts, referring to the strong performance of Macau gaming stocks in the first half of 2023, which lost momentum in the rest of the year.

However, Morgan Stanley believes that “mass market share trends” and “operating leverage” will serve as key drivers for stock selection.

“The sector is now trading at 10x EV/EBITDA and 10 per cent FCFE yield on our 2024e, which we think is attractive,” they explained.

Looking ahead, the analysts expect mass gross gaming revenue and industry EBITDA to grow by 25 percent and 34 percent, respectively, expressing confidence that the former could even reach at least 120 percent of the 2019 level by the end of the year.

The forecast takes into consideration the encouraging results for the recent Golden Week holiday when the city’s GGR hit a range of 105 percent to 110 percent of the 2019 level.

Additionally, discretionary sales in mainland China have seen a 30 percent increase compared to the 2019 level, as have the GGR in Singapore and Las Vegas. The analysts have also taken into account the 16 percent addition to Macau’s hotel room supply compared to 2019.

SOURCE: Macau News Agency.