Macau’s Global Gambling Crown Slips With Chinese Staying Home

(Bloomberg) -- Macau casinos’ gaming revenue is expected to show only an incremental improvement for September after plunging more than 90% for five consecutive months, even after travel and visa curbs have been gradually relaxed by China.

The monthly data for the world’s largest gambling enclave will be reported on Oct. 1, according to the Gaming Inspection & Coordination Bureau website.

Estimates

• Gross gaming revenue, or GGR, in September is estimated to slump y/y by a median 86%, according to 11 analysts surveyed by Bloomberg, with forecasts ranging from -70% to -88%
• October GGR is likely to drop 67% y/y, according to estimates by nine analysts ranging from -45% to -75%
• Full year 2020 GGR is seen falling 75% y/y, according to estimates by 10 analysts ranging from -67% to -81%
  • VIP revenue is estimated to decline 74.5% and mass revenue by 76% in 2020
• Looking ahead to 2021, eight analysts see a median 232% gain in GGR on year
• NOTE: August data, Macau Awaits Travel Recovery as August Gaming Revenue Falls 95%

What to Watch

JPMorgan (DS Kim)

• The current gaming revenue suggests 40-50% of demand from bordering Guangdong has recovered
• The pace seems slower than in other re-opened jurisdictions, such as Australia, Korea or the U.S., where local demand recovered to 70-100%+ of pre-Covid levels in a month
• Recovery progress is hindered by increased scrutiny on capital outflow by China, slower visa processing, required Covid testing and less-than-strong confidence in traveling overseas

Credit Suisse (Kenneth Fong)

• Sept. GGR is tracking toward another ~90% y/y decline despite ~40% of the market having already opened
• A meaningful V-shape improvement isn’t expected even though more individual travel visas are being re-opened starting Sept. 23
• If GGR fails to show meaningful recovery in Oct./Nov. when all visas reopen, there will be a risk of earnings downgrades as all catalysts have been played out

Citigroup (George Choi)

• Despite the Chinese government reopening tourism visa applications nationwide, all self-service visa kiosks remain suspended, leaving the government’s visa-processing capacity severely constrained. This has temporarily put a “soft cap” on the number of visas issued
• Junket operators and agents are finding business conditions increasingly difficult in the wake of the Chinese government’s latest clampdown
• Forecasts GGR to fall 74% y/y in the fourth quarter, and 2020 ending with an ~80% y/y decline
• Reduces 2021 GGR forecast by 9% to ~$30 billion, or 18% below the 2019 level

Bloomberg Data

• YTD share price performance: SJM Holdings +2.9%, Galaxy Entertainment -8.9%, MGM China -25.3%, Sands China -28%, Melco -31.4%, Wynn Macau -35.1%

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