Gaming | Morgan Stanley projects casino EBITDA up to 140% in Q4 versus Q1

Friday 15th January 2021

The casino industry's earnings before interest, taxation, depreciation and amortization (EBITDA) in Macau in the fourth quarter (Q4) of 2020 is forecast to increase by a whopping 140% from the first quarter of that year, GGRAsia quoted from Morgan Stanley's estimates.

The total postive corporate EBITDA was estimated at around USD240 million in Q4, revealed the banking institution, which unveiled its projections in a statement.

The noticeable advancement was likely to be driven by lowered operation costs and an enhanced revenue mix in terms of gross gaming revenue (GGR), it explained.

In the third quarter of 2020, daily operating expenses of the industry fell by 38% year-on-year. There was a similar decline in 2020's Q4 too, as "staff were let go or asked to take voluntary leave," the statement stated.

"The majority of this cost cutting will come back as volume increases," analysts of Morgan Stanley added.

Despite a notable EBITDA uptick in Q4 2020, which analysts described as "much better" than that of Q1 2020, the Q4 estimate is still "far away" from the USD2.3 billion of the average EBITDA run rate per quarter in 2019.

Morgan Stanley projects that VIP gaming will make up 21% of GGR in Q4 2020, compared to the 42% reported in the first quarter of 2020.

The estimated VIP revenue may decline by 83% in Q4 2020, compared to the same period in 2019, whilst the mass revenue is expected to contract by 62% year-on-year.

The combined GGR raked in by both the mass market and the VIP sector in Q4 2020 could represent a drop of 69.7% year-on-year, standing at just below MOP21.84 billion -- still a stark contrast to the MOP72.16 billion reported by the government in Q4 2019.

As of now, the Gaming Inspection and Coordination Bureau has not yet released the official data for Q4 2020.

The banking group also said that Q4 2020 was likely to see an increase in profits generated from shop rents at resorts, mainly driven by a greater shopping demand following the reinstatement of the Individual Visit Scheme for all mainland visitors to travel to the city since September.

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