VIP-Heavy Growth Prompts JPMorgan to Cut Macau EBITDA Outlook, Downgrading SJM and Melco

A renewed surge in VIP gaming volumes has prompted JPMorgan to trim its Macau EBITDA forecasts, warning that the recovery’s composition is becoming less favorable for margins. While headline gross gaming revenue (GGR) continues to show resilience, the investment bank cautioned that a heavier reliance on VIP play—traditionally lower-margin and more volatile than mass-market gaming—is diluting profitability across the sector.

In a recent note, JPMorgan highlighted that VIP momentum, though supportive of topline growth, does not translate efficiently into earnings. Higher commissions paid to junket partners and increased operating leverage mean that incremental VIP revenue contributes less to EBITDA compared with mass-market tables and premium mass play. As a result, the bank revised down its medium-term EBITDA assumptions for Macau despite maintaining broadly stable GGR expectations.

Against this backdrop, JPMorgan downgraded SJM Holdings and Melco Resorts & Entertainment, citing weaker earnings visibility and limited near-term catalysts to materially improve margin structure. For SJM, analysts pointed to its relatively smaller exposure to high-yield premium mass segments and ongoing operational adjustments following the opening of new properties. Melco, meanwhile, was flagged for a slower-than-expected recovery in operating leverage at its flagship resorts.

The report contrasted these operators with peers that have stronger mass-market and premium mass positioning, noting that such segments offer better cost efficiency, steadier cash flow, and higher returns on invested capital. JPMorgan reiterated that the post-pandemic Macau market is structurally different, with regulators favoring diversified, tourism-led growth rather than an overdependence on VIP gaming.

Industry observers say the findings underscore a key tension in Macau’s recovery narrative. While VIP volumes are rebounding faster than some had expected—helped by improving regional travel and credit availability—the long-term profitability equation increasingly favors operators that can convert visitation into non-gaming spend and mass-market play. This shift aligns closely with policy priorities set by the Macau SAR government, which has repeatedly emphasized sustainable and socially responsible development.

Looking ahead, JPMorgan maintained a cautious stance on the sector, arguing that valuation upside will be capped unless operators demonstrate clear progress in rebalancing their revenue mix. Until mass-market momentum meaningfully outpaces VIP growth, earnings upgrades are likely to remain selective, with SJM and Melco facing a more challenging path to restoring investor confidence.