MGM China is on pace to see its mass market gross gaming revenue (GGR) reach pre-coronavirus levels, perhaps as soon as the current quarter. That’d make it the first Macau operator to accomplish the feat.
MGM Cotai in Macau. MGM China could reach 100% of Q1 2019 mass market revenue this quarter. (Image: YouTube)
In a note to clients today, Morgan Stanley analysts Praveen Choudhary, Gareth Leung and Stephen Grambling observe that trends among mass bettors for MGM China are trending in the right direction to start 2023. The operator of two Macau integrated resorts and rival Wynn Macau are the top gainers among the six concessionaires in terms of mass market share gains this year and the duo are leading on the earnings before interest, taxes, depreciation, and amortization (EBITDA) front, according to Morgan Stanley.
Of those two operators, MGM China is experiencing the more rapid rebound in the early stages of 2023 due to the addition of more table games at its MGM Cotai and MGM Grand Macau venues.
Better mass market share translates into better EBITDA recovery. We expect MGM China and Wynn property EBITDA at US$97 million (47% of 1Q19) and US$148 million (38% of 1Q19) respectively,” wrote the Morgan Stanley analysts.
The bank estimates MGM China will notch first-quarter mass market GGR of $522 million, or 101% of the total in the comparable period of 2019.
US-Based Operators Leading Macau Rebound
Combine the aforementioned optimism surrounding MGM China and Wynn Macau with recent data confirming that Sands China was the concessionaire that gained the most market share across all three segments — mass, premium mass and VIP — in 2022, and one thing is clear: Macau concessionaires tied to US-based parents are leading this year’s gaming rebound in the special administrative region (SAR).
MGM Resorts International (NYSE: MGM) owns about 56% of the Macau entity while Wynn Resorts (NASDAQ: WYNN) controls 65.8% of its Macau unit, down from 71.6% previously due to the recent issue of $600 million in convertible debt. Las Vegas Sands is the parent company of Sands China, which is the largest Macau operator.
Still, the other concessionaires should not be counted as contributors to this year’s recovery. Morgan Stanley estimates that, on a percentage basis, the biggest EBITDA rebound will be experienced by Galaxy Entertainment. The bank forecasts that operator will reach half its first-quarter 2019 EBITDA in the current quarter.
Mass Market Players Helping MGM China, Rivals
In theory, casino operators are dependent on big spenders to drive recoveries when emerging from dark periods, of which 2020 through 2022 was certainly one in Macau. However, that’s not the case this year in the SAR. Rather, it’s mass and premium mass bettors doing the heavy lifting.
The bank estimates that mass GGR across the SAR will reach $3.4 billion this quarter, or 63% of what was seen in first three months of 2019. Should that projection prove accurate, it’ll be impressive because the analysts say it could happen on just 43% of first-quarter 2019 visitation levels.
“At this level of mass revenue, the industry should be making positive EBITDA and FCF (free cash flow), in our view,” concluded the Morgan Stanley analyst team.
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