The Morgan Stanley group suggests in a research note issued on Sunday that Macau’s January casino gross gaming revenue (GGR) could be circa MOP7.75 billion (US$962.6 million), i.e., at least 31 percent of that for the same month in pre-pandemic trading conditions in 2019. The analysis is based on the institution’s estimate for daily GGR in the first 15 days of January.
An important caveat is that in 2019, the Chinese New Year holiday was in early February, while this time, it falls within January.
The festive period is traditionally an important trading period for Macau’s casino industry, though holiday demand was more muted during the period 2020 through to 2022, coinciding with China’s now-discontinued ‘zero-Covid’ policy.
“We raise our January GGR estimate from MOP200 million [US$24.8 million] to MOP250 million per day (+123 percent month-on-month, 31 percent of January 2019), 25 percent higher than consensus,” stated the Morgan Stanley group. “We assume 85 percent of GGR to be mass revenue.”
The Morgan Stanley note was issued following its analysts’ “first trip” to Macau in three years. They suggested that table minimum bets on the Macau peninsula “were generally MOP500 and, in Cotai, MOP2,000,” which was “higher than our expectation considering low utilisation”.
Banking group JP Morgan said in a memo issued on Monday that it saw “further improvement” in weekly GGR in Macau.
“Based on our checks, GGR for the first 15 days of January is estimated at MOP4.3 billion, implying a circa MOP285 million to MOP290 million/day run-rate,” stated JP Morgan.
“This suggests the GGR run-rate has improved further to MOP310 million-plus last week (January 9-15) as the impact from full border re-opening (January 8) has kicked in … despite the softer seasonality (i.e., lull period in between New Year and Lunar New Year holidays),” it added. “The print implies a 35 percent to 40 percent recovery on total/headline GGR versus pre-Covid.”
End of ‘zero-Covid’
January 8 was when China significantly eased its Covid-19 containment protocols. Since then, the volume of visitors from the Chinese mainland and from Hong Kong has risen significantly, so that for Friday to Sunday inclusive, the daily average was around 51,000.
Goldman Sachs (Asia) LLC was upbeat in a Monday memo, noting that several of Macau casino operators were “optimistic” about travel and gaming demand ahead of the week-long holiday period, “given the removal of most travel restrictions and healthy Chinese New year booking”. The institution hosted last week representatives of Galaxy Entertainment Group Ltd, SJM Holdings Ltd, and MGM China Holdings Ltd, at its “Consumer & Leisure” corporate events
According to a survey by GGRAsia, available room capacity at many Cotai casino-resort hotels had already been sold out by last week, for most days of the upcoming Chinese New Year.
“We expect MOP300 million to MOP400 million headline GGR during the Chinese New Year period by assuming it to maintain at 50 percent to 60 percent of pre-Covid-19 levels (versus MOP260 million on Jan 1 to 8),” observed the Goldman Sachs team.
Investment analysts caution that visitor volume itself is not a proxy for gambling revenue volume. Though Morgan Stanley thought it noteworthy that Chinese central government approval for resumption of package tours to Macau was “pending”. The institution added that in 2019 that tour trade had accounted for 23 percent of Chinese visitor volume to the city.
Morgan Stanley stated in its Sunday note, referring to one in particular of Macau’s six casino concessionaires that has a strong presence in the Cotai district, and referring also to the city’s downtown gaming venues: “Sands China [Ltd] as well as many of the peninsular casinos are thriving on grind mass business, which is expected to make a full return and should be bigger than 2019. This would require more day trippers from Guangdong province and the resumption of group tours.”
