Morgan Stanley's report indicates that Macau casino companies' third-quarter property EBITDA is expected to drop by 8% to $1.71 billion (while third-quarter gambling revenue only dropped by 1%), falling short of expectations and a 3% decrease from the second quarter; recovering to 79% of the level in the third quarter of 2019. The bank estimates that Macau casino companies' EBITDA in the next two years will see more negative adjustments.
Compared to Silver Entertainment (00027.HK), the bank prefers MGM China (01928.HK), estimating that MGM China may see improvement starting from the third quarter, with clear catalysts such as completion of renovations, dividend distributions, and parent company share buybacks. As for Silver Entertainment, the bank expects the company's market share growth to stabilize.
The bank's third-quarter forecast for Wynn Macau (01128.HK) is in line with the market, while its forecast for Galaxy Entertainment (00880.HK) is above market expectations. However, the bank's forecasts for other Macau casino stocks it covers are below market expectations. The bank's third-quarter EBITDA forecasts for Silver Entertainment, Melco Resorts and Entertainment (MLCO.US), and MGM China (02282.HK) are 10% lower than market expectations, and they expect their EBITDA to drop by 7% to 20% quarterly.
Looking ahead to the fourth quarter, the bank believes there is downside risk to Silver Entertainment's fourth-quarter and full-year EBITDA forecasts, while Wynn and Galaxy have lower risks. The bank anticipates a 4% quarterly growth in Macau casino companies' EBITDA in the fourth quarter.