Macau’s 1Q24 EBITDA could come in below the 6% quarter-on-quarter GGR growth of 6%, suggesting operators are still heavily focused on deleveraging, according to investment bank Morgan Stanley.
In a note previewing the upcoming earnings season, to be kicked off by Sands China parent Las Vegas Sands later this month, Morgan Stanley analysts Praveen Choudhary, Gareth Leung and Stephen Grambling said they believe industry corporate EBITDA to be around 5% higher quarter-on-quarter at US$1.9 billion – putting it at 81% of 1Q19 levels.
However, while some operators have confirmed that their short-term focus post-pandemic was deleveraging, the analysts said they expect to see smaller operating leverage benefits in Q1 “due to wage increase and some companies increasing promotions to attract customers.”
As such, key trends to keep an eye on during results season will be gambler spending power; updates on opex, reinvestment costs and committed investment guidance; and any changed views on dividend resumptions given that Sands, Melco and SJM are yet to declare any dividends since the pandemic.
“We think relative EBITDA performance and mass share gains will be key, and continue to prefer MGM China and Wynn Macau,” the analysts said. “We also think SJM share will benefit from better EBITDA growth, driven by Grand Lisboa Palace.
“We don’t prefer Sands or Galaxy just for 1Q24 earnings trade … we expect both to have lost market shares in 1Q24 [as] Sands does not have turnover rent benefit in 1Q24, while Galaxy may be hurt by more cost increases.”
Morgan Stanley added that Melco Resorts may have also improved its market share in February and March but that higher costs could have impacted margins.
Melco stated in its 4Q23 earnings call that reducing its debt remained its key focus in 2024.
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