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China – Global gaming sector watches on as analysts pitch Macau’s recovery

By - 8 April 2020

With gaming operators on pause across the world, many will be looking at Macau’s casino sector to gauge how their own recoveries may pan out once business is up and running again.

Macau’s 41 casinos began reopening on February 20 having been closed for two weeks. It is of course a unique market being the only place to gamble in China, but as one of the few gaming destinations to have reopened, its recovery offers some perspective.

A senior Macau casino executive said at the time of the reopening: “It is wise to open a little bit, even if business is slow. The government wants us to open because it signals a sign of stability for Macau.”

The recovery has been slow with only 250,000 tourists entering Macau in the month after casinos reopened, representing a fall of 92 per cent compared to 2019.

DS Kim, an analyst at JP Morgan in Hong Kong, said: “Business will likely remain extremely slow anyway amidst the restrictions on visas and transportation. Most Chinese players are probably unable or unwilling to travel at this point.”

Macau’s government has slashed its 2020 GGR forecast to 130bn patacas (US$16bn), half the initial projection of 260bn patacas and a 56 per cent decline from 2019. Macau’s operators have lost between $1.5m and $4m a day to keep their casinos operational.

“Forecasts for 2020 remain largely guesses at this time, with constantly changing conditions altering expectations on an almost daily basis,” said Vitaly Umansky, an analyst at Sanford C. Bernstein.

Mr. Umansky outlined two major factors for Macau’s recovery as being visa issuance and transport activity and gave several scenarios of how the recovery may shape up.
The optimistic outcome would see a rebound in the second half of the year resulting in an 11 per cent fall in revenues in 2020. His more conservative prediction sees a later recovery in the third quarter with GGR for the year as a whole dropping by 21 per cent. If the downturn carries on throughout the year, revenues could slump by 43 per cent.

Mr. Umansky added: “It could be materially worse; I doubt it is going to be materially better.”

Andrew Lee, Equity Analyst at Jefferies Equity Research, added: “With Chinese IVS and tour groups still suspended, we maintain our view that this could be relaxed on an individual region basis, albeit dependent on the number of ‘clean COVID-19 free days. Of the 10 top Chinese regions for Macau visitors, six regions have recent confirmed new cases. Guangdong is key, given visitors from the province account for 33 per cent of total Chinese visitors of which 73 per cent entered via IVS.”

He pitches the fall in Macau’s revenues for 2020 at a possible 45 per cent with a recovery of 33 per cent in 2021.

However with Guangdong Province stating that all arrivals from Macau and Hong Kong, including provincial residents, must stay in quarantine for two weeks, even those predictions may be optimistic.

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