Macau's Gaming Revenue Peaks Despite Economic Hurdles

In the face of significant macroeconomic challenges, the Macau gaming sector has showcased its resilience once again. According to insights provided by JP Morgan, Macau's gross gaming revenue (GGR) during the fourth quarter of 2024 reached unprecedented heights, marking the highest quarter in 20 terms. This achievement is particularly noteworthy given the backdrop of broader economic difficulties that prevailed throughout the year. Analysts DS Kim, Mufan Chi, and Selina Li from JP Morgan highlighted that while sector valuations remain low, the sector's performance was nevertheless alignment with expectations, consistent with seasonal tendencies. They also indicated that "a sector-wide rally seems unlikely" unless a clear catalytic event or broader market enthusiasm emerges.

Diverse Performance Across Market Segments

Macau's gaming results for 4Q24 demonstrated a commendable 3 percent growth quarter-on-quarter and a year-on-year rise of 6 percent. Breaking this down, the mass gaming revenue, including slot machines, achieved a 5 percent increment quarter-on-quarter, setting a new all-time high, surpassing pre-COVID levels by 11 percent. Meanwhile, the VIP segment remained stable, still only accounting for approximately 20 percent of its pre-pandemic figures.

The overall results can be considered "respectable," especially when factoring in the economic challenges and disruptions due to President Xi Jinping's visit. Pertinent to note is that operators will begin reporting their 4Q24 results from late January to early March. Industry experts anticipate modest gains in earnings, with an expected increase in EBITDA by 2-3 percent quarter-on-quarter and stable margins. However, individual operator results may vary, with shifts in market shares and operational spending being closely monitored by industry observers.

Market Dynamics and Future Expectations

Forecasts from JP Morgan hint at intriguing shifts in market shares within Macau's gaming landscape. MGM and Galaxy are anticipated to be the frontrunners, gaining larger shares of the market. Specifically, MGM is expected to see an increase of 90 basis points quarter-on-quarter, reaching a share of 15.6 percent, thus hitting its "mid-teens" target. Concurrently, Galaxy’s market share is projected to rise by 80 basis points to 19.7 percent, marking a significant post-reopening high as it continues with its Phase III expansion.

In contrast, Sands is slated to experience a fall, with a notable decrease of nearly 100 basis points due to interruptions from renovations at the Londoner hotel. This drop will likely stabilize from the Chinese New Year until May, as room modernizations conclude. SJM and other entities like Wynn and Melco foresee little to moderate changes in their figures. With respect to EBITDA growth, Galaxy is expected to outperform significantly with 8 percent growth, aligning closely with its pre-COVID highs at 80 percent maintenance.

Looking ahead to the Chinese New Year (CNY) Golden Week, JP Morgan anticipates modest growth despite high hotel bookings indicating robust demand. Comparisons with the previous year's strong performance present a challenge for growth, particularly from January to May 2025, setting expectations for a steady 4 percent increase in industry GGR in the first half of the year, followed by a 7 percent rise in the second half.

Source: Macau’s 4Q24 GGR hits 20-quarter high despite poor macro: JP Morgan, Asia Gaming Brief, January 16, 2025.