Improvement as border restrictions eased
Macau’s gross gaming revenue (GGR) looks set to improve mid-August, according to investment bank JP Morgan. Analysts DS Kim, Derek Choi, and Jeremy An believe the market will begin to recover as a delayed result of the easing of border restrictions between Macau and mainland China.
region’s six casino operators to post positive EBITDA from October
Analysts have predicted that August GGR will decline by 85% year-on-year, in comparison to drops of more than 90% experienced since April. This is then expected to improve each month, with the year-on-year decline reaching just 50% in October. JP Morgan explained that this 50% marker will allow the region’s six casino operators to post positive EBITDA from October onwards.
Macau’s GGR is expected to recover to between 55% and 60% of 2019 levels in Q4 2020. This will then reach 85% in the first quarter of 2021, 90% in Q2 2021, and 100% in Q3 2021.
Tourist visas still suspended
On July 15, government officials introduced a Macau-Guangdong travel bubble to allow Chinese citizens to cross the border into Macau without undergoing a 14-day quarantine. Its announcement saw stocks rise for Macau-based casino operators the day preceding its launch, with Galaxy Entertainment and Sands China up 10% and 9% respectively.
At the time, JP Morgan described this as an “important step towards normalization” of travel for the Macau visitor market. However, the investment bank’s analysts have also argued that it has been “of little help to gaming demand” because of the continued suspension of tourist visa issuance.
eventual return of tourist visas as the real key to Macau growth
Despite predicting gradual GGR improvement this month as a delayed result of that travel bubble, JP Morgan sees the eventual return of tourist visas as the real key to Macau growth.
Local Chinese media has reported that non-tourist visas will resume for the entire country from August 12. This will allow some high-end gamblers to utilize business permits to travel to Macau. However, there is a three- to five-week waiting list for business permits, which will delay any subsequent impact on high-roller GGR.
Slow and steady recovery
Macau’s July GGR saw significant signs of recovery month-on-month. Figures from the Gaming Inspection and Coordination Bureau show that the market generated casino revenue of MOP 1.34bn ($168.4m) for the month, an increase of 88% from June.
Macau will generate total Q3 GGR of $1.32bn
Despite this, total GGR still represented a drop of 95% year-on-year. This was down from June however, which saw a decline of 97% from 2019. GGR for the first seven months of 2020 was MOP35bn ($4.35bn), a drop of 80%.
Recent estimates from investment bank Deutsche Bank Securities Inc. suggest Macau will generate total Q3 GGR of $1.32bn, a drop of 85% year-on-year. In a statement published Saturday, the group predicted full-year revenue would be $11.8bn for 2020, a drop of 68% from 2019.