Mass-market casino gross gaming revenue (GGR) for the upcoming Chinese New Year (CNY) holiday is likely to recover to 30 percent to 40 percent of pre-Covid-19 levels, spurred by factors including discontinuation since the second half of December of China’s ‘zero-Covid’ policy, says JP Morgan Securities (Asia Pacific) Ltd.
All six Macau operators were likely to record fourth-quarter 2022 losses in terms of earnings before interest, taxation, depreciation and amortisation (EBITDA), “but investors will focus on forward commentary from managements anyway,” wrote analyst DS Kim in a Monday memo titled “Looking for a (much) better 2023, after another year to forget”.
“We continue to model mass GGR to recover to 30 percent to 40 percent of pre-Covid levels during lunar new year and first quarter 2023, which should be enough for the [Macau casino] industry to turn profitable on EBITDA levels,” Mr Kim stated.
China’s State Council has designated the period from January 21 to 27 inclusive as the Chinese New Year holiday period for the mainland. The festive break has traditionally been an important earnings period for the Macau casino sector.
A number of commentators has for now been bearish on the outlook for VIP gambling in Macau, as the segment continues to be in a state of uncertainty following the discontinuation one year ago of most collaboration between the Macau operators and the traditional big-brand junket groups.
Nonetheless JP Morgan’s Mr Kim observed in his Monday note: “We feel very comfortable projecting the industry’s mass GGR and EBITDA to fully normalise to pre-Covid levels by 2024.”
The institution forecasts Macau-market 2023 GGR to be about MOP102.1 billion (US$12.7 billion), i.e., circa 35 percent of 2019’s, the most recent year of pre-pandemic trading. JP Morgan thinks that will rise in 2024 to MOP186.2 billion, or circa 64 percent of 2019’s.
Mr Kim also gave some commentary on Macau’s December GGR result, which was up 16.1 percent compared with the previous month’s tally of just under MOP3.00 billion, but was down 56.3 percent year-on-year. The full-year 2022 result was down 51.4 percent year-on-year, at MOP42.20 billion.
December GGR was “as weak as expected,” stated the analyst, “given the worst wave of Covid-19 in both Macau and mainland China as widely publicised”.
He added: “What’s important is the pace and magnitude of recovery into 2023, about which we remain sanguine given the expected Covid peak this month, as well as the faster-than-expected border normalisation.”
