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China – Citi sees EBIDTA improving for Macau’s casino operators

By - 15 January 2024

Investment bank Citi is tipping EBITDA for Macau’s casino sector to increase by six per cent quarter-on-quarter to reach US$1.95bn for the quarter ending December 31 2023, driven by improved performance by SJM Resorts and Wynn Macau.

Citi analysts George Choi and Ryan Cheung believe Galaxy Entertainment Group and Sands China will have lost market share.

Referring to SJM and Wynn, they said: “We expect them to be the two casino operators with the greatest quarter on quarter EBITDA improvements. Even though we believe most of the market share changes in 4Q were driven by luck, the short-term market share gains will likely translate into more resilient EBITDA margins for MGM China, Melco, Wynn Macau and SJM which should in turn translate into near term share price outperformance.”

“Macau is a six player oligopoly. Reducing one’s spending on player reinvestments is no different from gifting market share to its competitors. That said, the six operators learned their lessons from the junket commission price war back in 2008-09. This is why even though player reinvestment costs have been increasing, we do not see any out of proportion irrational market buying behaviour by any operators.

“We anticipate industry EBITDA margin in 4Q23 to remain largely unchanged quarter-on-quarter at around 28.5 per cent. At an individual operator level, we believe that quarter-on-quarter volatility in EBITDA margins has more to do with the operators’ market share change for the quarter rather than the amount spent on player reinvestments.”

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