Removal of “travel impediments” inbound to Macau, including from places beyond mainland China, “are not likely until next year”, says a Monday note from brokerage Sanford C. Bernstein Ltd.
“In the short-term, we expect GGR [gross gaming revenue] improvement to begin in the fourth quarter, but more significant travel impediment removals are not likely until next year,” wrote analysts Vitaly Umansky, Louis Li, and Kelsey Zhu.
They added: “We expect September GGR to reach mid-30s of percent of 2019 GGR,” with “October reaching approximately 40 percent of 2019.”
The memo further stated – referring to a Chinese national holiday period encompassing National Day on October 1, and commonly referred to as Autumn Golden Week: “Golden Week could be a wild card and will have impact on stock prices, but investor expectations at this stage are muted.”
That was due in part to previous fluctuations this year, in visitor and GGR trends linked to occasional outbreaks of Covid-19 in mainland China, said the institution.
“As Covid cases have subsided and travel impediments gradually relax, we expect GGR to be back to April/May levels in October,” stated Sanford Bernstein.
Macau casino GGR rose 24.3 percent sequentially in May, to nearly MOP10.45 billion (US$1.31 billion), compared to MOP8.40 billion in April.
By contrast, August – which saw a tightening of inbound travel rules after four local people tested positive for the Delta variant of Covid-19 – saw GGR fall 47.4 percent sequentially from July, to MOP4.44 billion, compared to MOP8.44 billion in July.
“Longer term, Individual Visit Scheme eVisa, group visa restart, and Hong Kong travel resumption will be necessary to drive GGR upwards,” said Sanford Bernstein, referring first to two exit visa schemes used by mainland visitors to Macau.
Last week, neighbouring Hong Kong announced a number of unilateral although cautious measures to offer quarantine-free inbound travel to Hong Kong via Macau. But Macau officials said last week that Macau would maintain for now its quarantine protocol for inbound travel from Hong Kong.
A number of investment analysts has said Hong Kong contributed circa 15 percent annually of Macau casino GGR in pre-pandemic times. Only mainland China has currently a mostly quarantine-free travel bubble with Macau.
Sanford Bernstein said in its Monday memo that even with Macau casino GGR at circa 30 percent of 2019 levels, and visitor volume only 20 percent of what it termed “normal”, the Macau casino sector was able to be “EBITDA profitable,” i.e., generate positive earnings before interest, taxation, depreciation and amortisation.
The brokerage expected Macau’s full-year GGR for 2021 to be 34 percent of 2019’s, with “mass rising to over 41 percent of 2019,” but with VIP being below “25 percent of 2019 levels”.
“We expect mass to recover to above 2019 levels in 2023 and then achieve low double digit growth as the structural mass/premium mass drivers remain in place,” wrote the analysts. “VIP will continue to struggle, rising to only circa 50 percent of 2019 levels in 2023,” they added.
