View source for User talk:Morgan Stanley Slashes Macao Op 2023 EBITDA Outlook 5 pct

Banking group Morgan Stanley says it has lowered estimates for earnings before interest, taxation, depreciation and amortization (EBITDA) by an average of 5% for six Macau casino operators against the backdrop of a market recovery.


The forecast decline for Macau's gaming industry EBITDA is "to reflect our expectations for a slightly slower-than-expected recovery," wrote analysts Praveen Choudhary, Gareth Leung, Stephen Grambling and Nicholas DeValeria.


"Operational leverage has led to a 16% drop in industry net profit estimates for 2023," the agency said in a note Monday, adding to costs for Macau casino operators as their businesses continue to grow.


Morgan Stanley expects Macau's gaming industry EBITDA to reach nearly $6.55 billion this year, compared to the previous estimate of $6.9 billion.


The agency said the sector's net profit would be about $24.05 billion, with industry-wide net profit of $2.2 billion, down 16% from the previous estimate of $2.61 billion.


The banking group downgraded Sands China's 2023 EBITDA estimate to $2.2 billion, down 4% as it trimmed the casino company's assumption of bulk market share, saying, "There are potential impacts as capacity is added by colleagues and the grounding mass recovery slows."


Morgan Stanley says Galaxy Entertainment Group's revised 2023 EBITDA forecast is HK$11.18 billion (US$1.43 billion), down 12% from previous estimates. This was due to "real EBITDA in Q2 2023" and "low EBITDA" from Galaxy Macau, the group's flagship asset.


The agency believes Wynn Macau's 2023 EBITDA will approach HK$6.33 billion, 7% below previous estimates, for "downside market share assumptions in 2023."


Morgan Stanley expected SJM Holdings' 2023 revised EBITDA of HK$1.89 billion, a 24% decrease from the previous estimate. This was due to a "slower ramp" at the group's newest property, the Kotai Grand Lisboa Palace Casino Resort.


However, the banking group raised its 2023 EBITDA estimate for two of the city's casino operators.


The agency currently estimates MGM China Holdings' EBITDA for 2023 will be around HK$6.01 billion, up 1% from its previous forecast.


It also raised its 2023 EBITDA estimate for Melco Resorts & Entertainment by 8% to "low operating costs," to $1.07 billion.


Morgan Stanley also cut its 2024 EBITDA and net profit estimates for the Macau gaming industry by 2% each. "Because of lower slot revenue estimates ... overall total gaming revenue remains unchanged as VIP estimates are higher."


"Slot revenue is higher margin than VIP revenue," it noted.


The agency currently estimates Macau gaming industry 2024 EBITDA of $9.48 billion, with total net income approaching $5.21 billion.

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