The Zhitong Finance App learned that Bank of America Securities released a research report stating that discussing the main credit themes in the Macau gaming industry in 2027, gambling revenue is expected to be roughly the same year on year, about 85% of the 2019 level, and trend visibility is still low; EBITDA is expected to lag slightly behind gambling revenue due to intense competition in the midmarket and high-end, but planned operating expenses will be cut or bring room for improvement.
The bank pointed out that while profit growth is limited, maintaining capital expenditure and shareholder returns may cause some operators to experience negative free cash flow. To preserve liquidity, operators are expected to first refinance maturing US dollar bonds in the bond market and back up with lower-cost syndicated loans. Ratings are worth paying close attention to. In particular, Aobo (00880) has leveled off gambling or made its deleveraging process slower than the rating agencies' expectations, while Aobo's floating rate loans account for a relatively high share and are most sensitive to rising interest rates. In terms of policy, Macau may tighten enforcement against illegal currency exchange, as well as the Mainland's new policies or stricter enforcement against high-net-worth individuals, all of which may affect high-end demand and are the main points of observation.
Looking ahead to next year, the EBITDA for properties in this industry will be around 80% to 85% of 2019 levels, slightly behind revenue (expected to be equivalent to 85% of 2019 levels). Gambling revenue is expected to be roughly the same as year on year. Competition for high-end midfielders is fierce, which may keep reinvestment high and limit the room for revenue to be converted into EBITDA.
In terms of bond proposals, the bank gave “additional holdings” to SJMHOL 2028 and 2031 bonds, believing that despite being concentrated due in 2028, liquidity risk is still manageable, and the valuation already reflects weak fundamentals and downward pressure on ratings. Cash flow analysis shows that Sands China (01928), Wynn Macau (01128), and Aobo may have free cash flow gaps from 2027 to 2028 while maintaining capital expenditure and dividends; entities related to MGM China (02282) and Macau International Development (00200) were relatively good (recorded positive numbers). The six operators have agreed to invest a total of MOP 9 billion into the new government guidance fund, which will be paid in equal amounts over three years. The bank believes that the impact on cash flow is expected to be manageable.