Macau’s gaming revenues have further accelerated over the past seven days, reaching a three-year non-holiday high of MOP$400 million (US$50 million) according to investment bank JP Morgan.
In his weekly GGR update, JP Morgan’s DS Kim said GGR over the first 19 days of February is estimated at MOP$7.2 billion (US$892 million) at a rate of almost MOP$380 million (US$47 million) per day.
However, this rate has accelerated to MOP$400 million per day over the past week, according to Kim, representing “a very solid print, especially considering slow seasonality post the long holiday.”
The estimate for the seven days from 13 to 19 February also implies a 45%+ recovery vs pre-COVID-19 levels for headline GGR, in turn suggesting mass GGR recovered to between 65% and 70% of pre-COVID levels.
“VIP recovery, which we estimate to be at around 15% of pre-COVID levels, has also been tracking solidly for a segment that’s been considered ‘gone’ given the demise of junkets, but we highlight again that VIPs don’t really move the needle much for the profits/CFs given the very low margin of high-single-digit (note we’ve modelled zero profits from VIP in our forecasts) vs 35% to 40% for mass.”
The latest positive update comes after Macau’s gaming operators booked GGR of MOP$11.58 billion (US$1.43 billion) in January – the highest monthly tally since January 2020.
In a separate note, Kim said he was bumping up his Macau estimates and piece targets across the board, with the Macau recovery only just beginning. Suggesting the sector is “entering the biggest upgrade cycle in 5+ years, Kim wrote, “We expect the demand to continue ramping-up with casual and less-hard-core players returning, to print sequential growth every quarter to hit 100% mass recovery by the end of this year (vs previously mid-2024E), and (well) beyond pre-COVID levels into next year.”
He also expects Macau stocks, which have risen by around 130% over the past three months, to continue improving.
“Our ‘23-24 EBITDA (which we believe is conservative) suggests ~15% upside risk to consensus, which we believe is the biggest revision potential we’ve seen in at least five years,” Kim said.
“If we are right, then we think these stocks can, if not should, trade toward the historical up-cycle multiples of 15x EBITDA, trading above our printed price targets that are set at the mid-cycle 13-14x. In short, we see at least 35% to 40% potential upside for all our OW-rated names here, and likely more if our thesis plays out. We feel Macau stocks are a fresh money idea.”
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