Macau Casino Profits Expected to Plunge in Latest Quarter

(Bloomberg) -- Macau casino operators are expected to see third quarter profits slump to $62 million in earnings before interest, tax, depreciation and amortization, according to a Bloomberg survey of estimates from eight brokerages.

• Analysts forecast that the latest quarter would be the worst so far this year for the world’s largest gambling hub, with the industry’s profit estimate plunging from the $414 million reported by operators in the previous three months. SJM Holdings Ltd. will likely post negative Ebitda for a seventh consecutive quarter, according to the survey. MGM China Holdings Ltd., after three quarters of profits, is expected to swing back to a loss.
• The industry profit estimate is down 97% from pre-pandemic levels in 2019. Last quarter, it was 83% lower than before Covid-19.

Ebitda Survey

* Data for Sands China Ltd., Wynn Macau Ltd., Melco Resorts & Entertainment Ltd. and MGM China is property Ebitda, while that of Galaxy Entertainment Group and SJM is company Ebitda.

• Local Covid-19 flareups driven by the delta variant and the government’s proposal to tighten its grip over gaming companies have combined to make the third quarter one of the most volatile since the virus first battered Macau’s tourism-reliant industry. After more than a year of travel resumption with mainland China -- the enclave’s largest source of visitors -- the city has faced new border restrictions after a resurgence of local clusters in late September. The travel curbs coincided with China’s National Day holidays, traditionally a peak tourist season for Macau, further damaging the gambling hub’s chances of recovery.
• Beijing and Hong Kong -- only a ferry ride away -- require quarantine for people traveling from Macau. The gaming hub also has similar entry requirements for arrivals from Hong Kong and parts of China. Neighboring city Zhuhai, after tightening border controls for almost a month, lifted a quarantine requirement for people coming from the enclave on Tuesday.
• “Sharp deterioration of visitor arrivals during the October Golden Week holiday is unlikely to end soon,” Bloomberg Intelligence analysts led by Angela Hanlee said in an Oct. 11 note. That could further impact gaming revenue in the fourth quarter, she said. Arrivals from mainland China fell 94% year-on-year during the holiday, she added.
• The proposed changes to the casino law, announced last month, triggered a record sell-off of gaming stocks, wiping out $18 billion in combined market value in just one day. It has also raised questions about the city’s future as a global gambling epicenter. Authorities want to approve dividend distribution, send representatives to directly supervise casino operators, increase local ownership in those companies and tighten scrutiny over junkets servicing high rolling VIP gamblers. A 45-day consultation period on the proposal ends Oct. 29.
• It’s the latest move in China’s push for Macau -- which relies on gaming revenue for 80% of government income -- to diversify its economy away from gambling. More scrutiny also stands to further deter VIP bettors, a prime target of Beijing’s crackdown on money laundering and capital outflows, from visiting the enclave.

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