Brokerage firm CLSA has revised down its Macau gross gaming revenue (GGR) forecasts for 2024 and 2025 by 3 per cent and 5.3 per cent to US$28.6 billion (MOP230 billion) and US$29.7 billion, respectively, driven by concerns about the crackdown on illegal money exchange activity.
In a recent note, analysts Jeffery Kiang and Leo Pan predict that Macau’s gaming sector EBITDA will decline by 5 per cent quarter-on-quarter to US$1.9 billion in the second quarter of the year, as the city’s GGR decreased by 1.6 per cent quarter-on-quarter.
“While factoring in the actual GGR in 2Q24, we also lower our expectations as a result of the ongoing crackdown on illegal money exchange activity from China. Whether the crackdowns will scale up remains to be seen,” the analysts wrote.
In early June, China’s Ministry of Public Security urged security forces not only in Macau but also on the Chinese mainland to step up cooperation in cracking down on illegal currency exchanges in Macau.
The so-called ‘money changers’, present around the city’s casinos, have been identified as a key method for moving funds across different jurisdictions, particularly between the Chinese mainland and Macau.
Along with the GGR forecast changes, the analysts also lowered their sector EBITDA forecasts for 2024 and 2025 by 8 per cent and 6 per cent, respectively, citing the rise of promotional activity among operators and rising payroll costs.
The brokerage now expects that sector-adjusted EBITDA will grow by 24 per cent year-on-year to US$8.1 billion in 2024, representing a recovery to 85 per cent of the 2019 level.
Sector EBITDA is expected to fully normalise in the second half of 2025, reaching 4 per cent above the 2019 level.
In the short-term, the analyst indicated that although a soft start to July’s GGR and the recent crackdown on illegal money exchange activity had weighed on investor sentiment, stable balance sheets and sensible competition should enable the companies to weather these short-term headwinds.
