September divides Macao gambling analysts, with budget constraints the pivotal driver

Even as September’s gross gaming revenue (GGR) is forecast to turn positive after three consecutive negative readings, market share competition is expected to weigh on margins, industry experts say.  

Double-digit operating expenditure (opex) rates were tolerated when GGR rose in lockstep, commented CLSA’s Jeffrey Kiang. The analyst is pencilling in just 1.7 percent GGR growth for September despite last year’s low base when gaming revenues were offline for 33 hours due to Super Typhoon Ragasa.

“The recovery is good, not great,” Kiang tells The Bay, adding that an estimated 880 million patacas (US$109 million) in GGR were lost on account of the weather-related closure.

[See more: Macao’s casino revenue was down 1.2 percent in August]

Demand weakness was prevalent in the interim numbers. Second quarter earnings before interest, taxes, depreciation, and amortisation (EBITDA) dropped 10.7 percent based on the broker’s forecasts, contracting the industry margin to 24.2 percent from 26.8 percent a year ago.

Amid the maturing landscape, market share gains have become the critical earnings driver. Even as the player market remains supported by a stronger renminbi and visitor traffic flows, there has not been a notable upswing in the gambling numbers, Kiang argues, also mentioning that July’s 2026 visitation levels were on par with those in July 2019.

Beyond GGR and tourism flows normalising following this summer’s World Cup, the sector is missing an immediate catalyst. In the broker’s latest report, CLSA downgraded its gambling revenue outlook to 2 percent for 2027 and 4 percent in 2028, removing 19.5 billion patacas over the two-year period.

Stock valuation in Macao’s gambling sector

Notwithstanding the challenges, analysts continue to identify selective investment opportunities given the market multiples of Macao gaming stocks. Given the overwhelming pessimism, a small amount of good news, such as flat quarter-on-quarter opex, could drive share prices higher, Morgan Stanley analysts contend. 

However, EBITDA expectations for the third quarter and full year still remain too high, according to the investment house, which downgraded its GGR outlook earlier this week to 3.5 percent from 5 percent.

A better September, helped by a stronger event calendar and a longer holiday period, should uphold a more stable second half, the bank argues, noting that this could in fact support a GGR closer to 10 percent, highlighting the divide among experts. 

[See more: How Hong Kong and Macao equities can help hedge against an AI stock market correction]

An annualized 2 percent GGR gain in the fourth quarter would translate to a 9 percent increase from the previous quarter. Furthermore, if fourth-quarter opex comes in under 10 percent, this would represent flat sequential cost growth, setting the stage for a positive EBITDA result, Morgan Stanley says. 

Risk-reward profile supports a look by fund managers. The sector is trading at historically depressed market multiples of 7.4x forward EV/EBITDA based on the bank’s forecasts. The current free-cash-flow yield estimate is also 9.1 percent – materially higher than its post-Covid long-term average of 7.5 percent, while the sector yield is 6 percent. 

However, CLSA analyst Jeffrey Kiang notes that simple comparison factors will not be enough to attract new capital, particularly as rising US bond yields threaten to pull equity liquidity into Treasuries. The US central bank raised interest rates on Wednesday for the first time since 2023, widening the yield spread with the Macao gambling sector and mitigating its relative appeal to investors.