Morgan Stanley predicts a positive 3Q Macau EBITDA

TAGs: Leonard Postrado, Macau, morgan stanley

American investment bank Morgan Stanley has painted a rosy picture for Macau casino operators’ earnings for the third quarter.

In a note it released on Friday, Morgan Stanley predicted that Macau casino operators’ collective earnings before interest, taxation, amortization, and depreciation (EBITDA) may have risen 5 percent year-on-year and 7 percent quarter on quarter.

Morgan Stanley predicts a positive 3Q Macau EBITDAThis is the first year-on-year growth in quarterly earnings since the former Portuguese enclave has been afflicted by an economic malady as a result of Xi Jingping’s anti-corruption crackdown, according to the investment bank.

Morgan Stanley also taken into account in their recent note the openings of two new Cotai properties that opened on September 13 and on August 22 respectively, and that are promoted respectively by Sands China Ltd and Wynn Macau Ltd.

“Industry EBITDA could record its first positive growth (+5 percent year-on-year) in eight quarters,” the financial institution said. “Company EBITDA could grow to US$1.57 billion… due to cost cutting, seasonality and higher rental income partially offset by increased operating expenses from the opening of the Parisian [Macao] and Wynn Palace.”

Data from the Gaming Inspection and Coordination Bureau showed that Macau’s casino gross gaming revenue (GGR) notched a 1.2 percent growth year-on-year to MOP55.0 billion (US$6.9 billion) in the three months to September 30.

It was the best quarterly performance the Macau market has seen since the second quarter of 2014, according to the board.

As for Macau Casinos, Morgan Stanley forecast that the Parisian Macao generated US$14 million in EBITDA for the 18 days of the third quarter the property was operating; and that Wynn Palace generated US$13 million for its 40 days of third-quarter operations.

Morgan Stanley is bullish about the performance of Sands China, Galaxy Entertainment, Melco Crown Entertainment, SJM Ltd. Holdings, and MGM China Holdings Ltd while it expects Wynn Macau Ltd’s EBITDA growth to underperform and decline 1 percent quarter-on-quarter.

However, the positive outlook of Morgan Stanley on Macau casinos was overshadowed by the recent Chinese raid inside billionaire James Packer’s Crown Resors Ltd.

Bloomberg reported that Macau casinos dragged HongKong’s Hang Seng Index down by 0.9 percent at 2:29 p.m., Monday.

HongKong-listed gambling firms shed 2.8 percent, heading for its lowest level since early September. Galaxy Entertainment, Sands China and Wynn Macau Ltd. dropped at least 2.7 percent.

“The casino industry is in a sensitive position as recent Chinese government policy has been anti-corruption,” Ronald Wan, chief executive of Partners Capital International Ltd. in Hong Kong said, according to the business news website. “The rate hike in December is unavoidable. Some people use that as an excuse to sell down the Hong Kong property sector.”


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