Macau GGR Could Hit 90% of Pre-COVID Levels in 2023, Fully Recover Next Year

Posted on: August 8, 2023, 03:15h. 

Last updated on: August 8, 2023, 03:34h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Macau’s 2023 gross gaming revenue (GGR) recovery is so sturdy that the metric could approach 90% of pre-coronavirus levels.

Macau GGR
Pedestrians walk the Cotai Strip in Macau near Sands China’s Londoner. S&P says GGR there could reach 90% of 2019 levels this year. (Image: Bloomberg)

That’s the take of S&P Global Ratings, which has boosted its outlook for Macau gaming revenue multiple times since the start of 2023. In the second quarter, GGR across the market, including mass, premium mass, and VIP guests, reached 86% of the levels seen in the comparable 2019 period, helped by a robust recovery among mass-market bettors.

The mass-market recovery outpaced our prior expectation that it would hit 75% of 2019 levels in the second quarter of 2023,” noted S&P Global. “We now assume these revenues will rise to 90%-95% of 2019 levels in the second half of the year. As a result, we now believe mass GGR could recover this year to 85%-90% of 2019 levels, compared with our previous expectation for a recovery this year to 75%-85% of 2019 levels. We expect it to fully recover in 2024.”

There are signs that the Macau recovery has momentum and that the S&P estimates could be met or exceeded. For example, the recently reported July GGR data was the special administrative region’s (SAR) best month by that metric since the start of the COVID-19 pandemic.

Macau GGR Getting Assist from Select Operators

There are six concessionaires operating integrated resorts in the Chinese enclave, but contributions to the SAR’s GGR recovery aren’t linear across the group.

While second-quarter earnings reports from the six operators have been solid across the board with some updates left to come, there are some clear leaders emerging. That includes Lawrence Ho’s Melco Resorts & Entertainment (NASDAQ: MLCO).

“Melco’s second-quarter Macao mass GGR came in at 84% of 2019 levels, roughly in line with the market. We continue to expect Melco to outperform the market in the next few quarters, on the back of incremental contributions from Studio City Phase 2,” added S&P. “The project was partially opened in early April and is scheduled to add another approximately 560 rooms with the opening of the W Macau in September.”

Analysts are constructive on Melco due in part to the fact that it isn’t entirely dependent on Macau to drive top and bottom-line growth. Melco also offers investors the benefit of geographic diversity, as it has operations in the Philippines, and recently opened Europe’s largest casino in Cyprus.

S&P expects Melco’s 2023 earnings before interest, taxes, depreciation, and amortization (EBITDA) to approach 70% of 2019 levels before making a full recovery next year.

Other Macau Operators Contributing, Too

Among the other concessionaires contributing to the Macau recovery cause, Las Vegas Sands (NYSE: LVS) stands out. The largest operator in the SAR delivered strong second-quarter results and remains constructive on the long-term trajectory of the territory. S&P recently upgraded Sands’ credit rating to investment-grade status.

In terms of near-term tests to the Macau rebound thesis, Wynn Resorts (NASDAQ: WYNN) steps into the earnings confessional on Wednesday after the close of US markets. Its Wynn Macau unit operates the Wynn Macau and Wynn Palace casino hotels.