Gaming operators to break even in Q3 – Brokerage

Brokerage Morgan Stanley indicated in a report that local gaming operators should break even in the third quarter of this year.

The group estimates that all six gaming concessionaires will report a total of US$1.07 billion in negative quarterly property EBITDA for the second quarter, but with US$160 million expected in positive EBITDA for the third quarter of this year, and then US$1.38 billion in the last quarter.

However, according to the company’s estimates, Sands, Galaxy and Wynn would show positive property EBITDA results in the third quarter, but with Melco, MGM and SJM to remain in the red.

This would be achieved by better cost rationalization and despite lower gross gaming revenues and a weaker revenue mix, with VIP results better than mass.

Still, the brokerage noted that four of the six operators – Sands, Wynn, MGM and Melco – have issued or plan to issue new debts worth US$4.25 billion in the last two months.

‘At a rate of 5 per cent, it could mean additional interest expense of US$210 million,’ Morgan Stanley noted.

The financial services company estimates that gross gaming revenues in the third-quarter will reach US$3.6 billion unless Chinese authorities reinstate the much needed individual visa scheme (IVS), with mass revenues to decline by 65 per cent year-on-year and VIP by 50 per cent year-on-year.

Morgan Stanley analysts also projected that daily gaming revenues for July/August to decline sharply to amounts between MOP139 million MOP346 million.