Macau July Gross Gaming Revenue Could Be Best Since Start of COVID-19

Posted on: July 18, 2023, 02:49h. 

Last updated on: July 19, 2023, 11:53h.

Even with typhoon warnings acting as a headwind, Macau casino operators posted strong gross gaming revenue (GGR) through the first 16 days of July. That is positioning this month to be the best in GGR terms since the start of the coronavirus pandemic.

Macau gaming revenue casino China COVID-19
Pedestrians walk the Cotai Strip in Macau near Sands China’s Londoner. July could be the best month of gaming revenue there since the start of COVID-19. (Image: Bloomberg)

Helped by strength in the mass-market segment, GGR in Macau was estimated at $1.03 billion through July 16, or an average of $64 million per day, according to JPMorgan. That’s slightly better than the second-quarter run rate of $62 million per day. In recent days, the July run rate slowed to $61 million because of typhoon warnings. But analysts still expect this month to be strong for the concessionaires.

We still see July printing the highest GGR since the pandemic, north of $1.99 billion,” wrote JPMorgan analysts DS Kim and Mufan Shi in a recent report. “This would imply mass GGR is comfortably running at 90%+ of pre-COVID levels, and we continue to expect a 100%+ recovery in mass by October.”

Macau casinos won $1.88 billion last month and $1.93 billion in May, with those two months representing the special administrative region’s (SAR) best GGR tallies since January 2020.

Good Timing for JPMorgan Call

The timing of JPMorgan’s July GGR forecast is pivotal, because Macau casino operators are about to start reporting second-quarter results. Those updates could include commentary on the current quarter.

For the gaming industry, earnings season kicks off in earnest on Wednesday when Las Vegas Sands (NYSE: LVS) reports after the close of U.S. markets. The operator of five Macau integrated resorts is expected to report earnings per share of 42 cents on revenue of $2.38 billion. Over the past 90 days, eight analysts lifted estimates on Sands, while just one downwardly revised forecasts.

Last week, Morgan Stanley analyst Stephen Grambling named Sands the firm’s top casino stock idea, calling it the best way to play the Macau recovery.

Should management teams sound optimistic about their outlooks for the back half of 2023, that could spark a rally in Macau equities. GGR is approaching two-thirds of 2019 levels, and some analysts believe that figure will be made whole by the end of this year.

Margins Matter for Macau GGR

Margins could set the tone for better run rates and higher GGR as 2023 progresses. On that note, JPMorgan is optimistic, with the analysts noting Macau margins could come in at record highs for the June quarter.

Vibrancy among mass and premium mass bettors is helping Galaxy Entertainment and Sands China, which were already entrenched in those segments, and those concessionaires that have been able to nimbly pivot away from dependence on high rollers.

However, data suggest the VIP segment is bouncing back, and could be a larger contributor to GGR in the back half of 2023.