The Singapore casino-market duopoly and Malaysia’s casino monopoly are respectively likely to recover to 90 percent of pre-pandemic gross gaming revenue (GGR) this year, up from 70 percent in 2022, but Macau will in 2023 only manage to reach at most 50 percent of 2019 GGR. That is the conclusion of a Wednesday research note issued by Moody’s Investors Service Inc.
“China’s reopening will boost Asia gaming revenue [in 2023], but not to a full recovery from the pandemic [impact],” said the memo. “We do not expect Asia gaming operators’… earnings to fully recover to pre-pandemic levels in 2023,” it added.
The team of Moody’s analysts stated that while GGR in Macau had surged since border restrictions were lifted in January, it expected full-year GGR only to rise to between 45 percent and 50 percent of 2019’s levels this year, and then 60 percent of pre-pandemic in 2024; compared to 14 percent of 2019 level last year.
“This reflects recovery in the mass-market segment, while continued strict regulations on junket operations will keep the VIP segment sluggish,” the memo stated.
A number of brokerages has recently been bullish about the revenue recovery pace of the Macau mass-market gambling segment relative to 2019.
“The VIP segment accounted for about half of total GGR in 2019, but we assume its share will decline to about 10 percent to 15 percent in 2023-24,” stated Moody’s.
Nonetheless the ratings agency said: “The mass-market segment, which has significantly higher margins than VIP, will drive the overall increase in Macau’s GGR.”
“This means that the pace of recovery in earnings for Macau operators will be faster than that of revenue,” added Moody’s.
It estimated the mass GGR in Macau would improve to around 75 percent and 100 percent of 2019 levels in 2023 and 2024 respectively.
Moody’s stated most rated Asian operators had “sufficient liquidity for the next 12 to 18 months,” aided by the fact that most companies had “limited short-term maturities in the next 12 to 18 months”.
“Adjusted EBITDA [earnings before interest, taxation, depreciation and amortisation] and leverage, as measured by debt/EBITDA, will improve for all rated Asia gaming operators in 2023-24”, the memo said.
Moody’s stated it expected debt levels at the Macau-focused operators to “decline gradually during 2023-24 as they start generating positive free cash flow.” Though it added it would in likelihood “take until 2025” before their leverage returns to levels “that are more in line” with their current rating categories.
“Leverage for Southeast Asia operators will also improve in the next 12 to 18 months, although Genting Bhd’s leverage trend may be affected by its application for a casino licence in New York,” said Moody’s referring to an upstate New York tender process.
Hong Kong-listed NagaCorp Ltd, which has a long-life casino monopoly in Phnom Penh, the Cambodian capital, would see a “similar level of [GGR] recovery as Macau”, Moody’s said.
It added: “Similar to companies in Macau, recovery in NagaCorp’s VIP segment will remain lacklustre over the next two years. Nonetheless, the company’s mass market and premium segment has exhibited strong signs of recovery.”
NagaCorp was the only company mentioned in the research note that had “insufficient liquidity buffer” because of a large bond commitment “maturing in July 2024,” stated Moody’s. But it added the casino company had “the flexibility to reduce discretionary spending if needed”.
