Opex higher, EBITDA lower for Macau operators in 1Q21: Morgan Stanley

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Macaus casino operators are expected to report a 23% quarter-on-quarter decline in Corporate EBITDA for the three months to 31 March 2021, impacted by seasonality and an increase in operating expenses, according to investment bank Morgan Stanley.

With results season just around the corner, Morgan Stanley analysts estimate that market-wide Property EBITDA will exhibit a 13% decline versus 4Q20 to US$256 million and Corporate EBITDA described as Property EBITDA minus corporate expenses a 23% decline to US$181 million.

The lower numbers are expected despite an 8% sequential increase in gross gaming revenue to MOP$23.6 billion (US$2.95 billion), driven by growth in the premium mass segment.

In a Monday note, Morgan Stanleys Praveen Choudhary, Gareth Leung and Thomas Allen said the expected 23% decline in Corporate EBITDA was primarily due to seasonality including weaker retail, hotel and F&B revenues and higher opex as a result of uneven recovery in 1Q21.

Macau daily opex was down 31% year-on-year in 4Q20, they state. In 1Q21, we estimate most operators will have seen 5% to 8% quarter-on-quarter higher opex (still at -27% vs 1Q19) due to uneven recovery (better March than January and February).

The analysts said they expect mass revenue and EBITDA to have shown sequential improvement for Sands China, Wynn Macau and Melco Resorts compared with declines for Galaxy Entertainment Group, MGM China and SJM.