Earnings before interest, tax, depreciation, and amortization (EBITDA) of Macau casinos for the second quarter of 2018 may not be as rosy as the previous quarter, according to international brokerage Morgan Stanley.
Morgan Stanley analysts forecast Macau casino property EBITDA will fall by as much 6 percent during the April to June 2018 period as reflected by the declines in both the VIP and mass market segments. The brokerage firm also expects Macau casinos’ gross gaming revenue (GGR) to slow to US$9.2 billion in the second quarter, 4 percent lower than the $9.46 billion casino in the three months ending March 31, 2018.
On the flip side, Morgan Stanley noted that Macau GGR in Q2 will still be 17 percent higher compared to the same period last year.
Morgan Stanley explained that rising labor costs, lower win rates, and softer gross gaming revenue in the last two months of Q2 will drag Macau’s EBITDA lower. It also didn’t help that there’s been a significant drop in VIP players, according to the gaming analysts.
Of the six Macau casino operators, Morgan Stanley forecast MGM China. will see the biggest quarter-on quarter EBITDA decline at 13 percent, while Galaxy Entertainment Group Ltd and SJM Holding Ltd. will see the smallest declines at 3 percent and 4 percent, respectively.
Investors have been jittery over the past few days after Macau posted underwhelming GGR for the second straight month. There are also troubling signs that some Chinese high rollers have steered clear of Macau amid the trade tensions between the United States and China as well as volatility in the yuan.
The weaker-than-expected GGR in June triggered a massive sell-off in Macau casino stocks. Bloomberg estimated that shares of MGM China, Galaxy Entertainment and Wynn Macau plunged more than 22 percent from their 2018 peak.
Unfortunately, Macau might not be able to take a break from all the bad news as gaming analysts predict the GGR weakness to continue in July. According to the latest Sanford Bernstein note, casino GGR is likely to grow by 10 to 12 percent this month.