Positive FCF comfortably attainable to all gaming operators – JP Morgan

Macau’s economy is showing a momentum of accelerated recovery with multiple favorable factors emerging after three years of the COVID-19 pandemic.

The SAR’s GGR for the first 5 days of this month is estimated at MOP1.9 billion (US$235 million), implying a daily average of MOP380 million – a number in line with the January print of MOP374 million per day, according to J.P. Morgan analyst DS Kim. 

It was a “very decent” figure considering the absence of Chinese New Year holidays, stressed Kim noted in a recent report. The number accounts for at least 45 percent of pre-Covid levels, suggesting that mass-market GGR had recovered to 65 to 70 per cent of pre-Covid levels, the investment bank said.

“At this level, all operators (perhaps except SJM given the operating expense burden from Grand Lisboa Palace) should already and comfortably be printing positive FCFs (= EBITDA + internet costs + maintenance capex),” the analyst said.

The estimate marks an important milestone that could be confirmed by the first quarter results later, and if true, it would be 2 to 3 quarters earlier than what the market had expected or modelled, according to the report describing it as “very positive fundamentally”.

J.P. Morgan highlighted that the GGR for the first five days of the month was better than was expected, although the period did include a bit of a boost from tail-end demand after the Chinese New Year, which helped with high-end demand more than the mass market.

The brokerage believes that most of market participants, including on the buy-side, were looking for sequential pull-back on GGR.

The number of tourists visiting Macau increased obviously during the Spring Festival holiday from Jan. 21 to 27, and the resumption of cross-border group tours starting on Monday has injected vigor into different industries and enhanced public confidence in economic development.