Macau’s casinos expected to post a loss of $1 billion by the end of the year

Daily operating expenses for the six major casinos operating in Macau has been reduced by 21 percent year-on-year

There are six licensed casino operators in Macao including Sands China, SJM Holdings, Wynn Macau, Galaxy Entertainment Group, MGM China Holdings and Melco Crown Entertainment.

The six major casino operators in Macau are expected to report US$378 million in gaming revenues for the second quarter, this will mean a drop of 95 per cent year-on-year. Morgan Stanley predicts Melco Resorts will be down 92 per cent year-on-year and at MGM China expenses almost doubled revenues this quarter.  

With Macau’s borders closed, focus will likely be on who has done the most to control operating expenditures during this difficult period. In total, daily operating expenses for the six companies has been reduced by 21 percent year-on-year and 5 percent from the prior quarter to about $15 million. Over the whole year of 2020 Morgan Stanley expects Macau’s revenues to decline 55 percent before rebounding back to 90 percent next year. 

In terms of Ebitda, they expect the operators to post a loss of $1 billion, with Sands China and Melco Resorts Entertainment accounting for almost half of that. This is compared to a profit of $2.4 billion in the same period a year earlier. 

Morgan Stanley’s analysts Praveen Choudhary and Gareth Leung said: “Macau stocks rose 21% in 2Q20, outperforming the Hang Seng Index by 15 percentage points; we think the market believes the worst is behind us and pent up demand and removal of overseas destinations as a choice could drive upside to estimates. While 2Q numbers may not provide when the travel restrictions will be lifted or how big 2021 could be, it can answer two questions: (1) who controlled costs the most, and (2) who lost the least as a percentage of Enterprise Value.” 

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