According to brokerage firm Morgan Stanley, Macau’s gaming sector is bracing for a slowdown in EBITDA growth for June and July, influenced by mainland China’s crackdown on money exchange activities. Analysts Praveen K. Choudhary, Gareth Leung, and Stephen W. Grambling have projected a challenging second quarter, marking the first quarter-on-quarter decline in industry mass gross gaming revenue (GGR) and corporate EBITDA since the post-COVID-19 reopening, as reported by Macau Business.
The analysts anticipate a 2% drop in mass GGR quarter-on-quarter, bringing it to 113% of 2019 levels. Corporate EBITDA is expected to decrease by 7% quarter-on-quarter, reaching 80% of pre-pandemic levels. To meet the full-year 2024 consensus, the gaming sector needs a 5% EBITDA growth in the second half of the year. However, the crackdown on money exchange activities in June and July is likely to contribute to the slowdown. Additionally, weaker macroeconomic conditions, reduced consumption, and lower retail sales in China might continue to impact Macau’s market in the third quarter.
In June, China’s Ministry of Public Security called for increased cooperation between security forces in Macau and the mainland to combat illegal money exchange operations. These “money changers,” particularly around casinos, facilitate fund movements between the mainland and Macau, drawing attention from authorities. This crackdown is seen as a significant factor in the expected EBITDA slowdown.
Looking ahead, the analysts also predict a negative impact on fourth-quarter results due to the expected visit of China’s President Xi Jinping. He is anticipated to visit Macau to commemorate the 25th anniversary of its handover to China by the end of the year. This visit might lead to increased regulatory scrutiny and further pressure on the gaming sector’s performance.