GGRAsia – CNY may deliver 50pct pre-Covid mass GGR in Macau: JPM

CNY may deliver 50pct pre-Covid mass GGR in Macau: JPM

Jan 25, 2023 Newsdesk Latest News, Macau, Top of the deck

Macau’s tourism-market performance for the first four days of the Chinese New Year (CNY) break was “decent but not amazing,” says a Wednesday note from brokerage JP Morgan Securities (Asia Pacific) Ltd.

The institution cautioned that visitor arrival tallies alone, had not “accurately” indicated the level of casino gross gaming revenue (GGR) in the past, adding that “the vast majority of lunar new year gaming volumes” had occurred on days four to six of the holiday period in previous times.

As a consequence, “our checks indicate a 50 percent-plus recovery in mass GGR,” compared to the equivalent holiday period in 2019, is “certainly doable”, wrote analyst DS Kim.

He noted that in the first four days of the holidays, day-trip visitors from Hong Kong had provided a proportionally-higher percentage of daily arrivals than they had in pre-pandemic trading, and that such consumers typically had “smaller gambling wallets” than other demographics, including people travelling from mainland China.

Macau welcomed 244,664 visitors in the first four days of the week-long holiday, according to official data published by the Macao Government Tourism Office. That was up 330.1 percent from the comparable period a year earlier.

Mainland visitors accounted for 56.3 percent of all arrivals in the first four days of the holiday, while Hong Kong consumers represented 37.6 percent of total visitors, showed the data. That compared with “typically” around 25 percent of Macau’s visitors coming from Hong Kong, in pre-pandemic trading conditions said JP Morgan.

“Put differently, mainland visitation, which drives most of the gaming revenues, has recovered to 30 percent-plus of pre-Covid levels” in the first four days, which was “pretty solid but may not be as good,” as the expectations of some investors, said analyst DS Kim.

China’s State Council has designated the holiday period for mainland residents as January 21, a Saturday, to January 27, a Friday, inclusive. The festive break in Hong Kong is designated as running from January 23 to January 25.

JP Morgan suggested “the next milestone will be the official January GGR release next Wednesday, 1 February”. Those figures would “carry extra weight” as “the first GGR data after the full reopening” of the market, which the institution dated to January 8, coinciding with relaxation of most Covid-19-related restrictions in mainland China, and Macau.

Mr Kim said the banking group’s modelling had anticipated January GGR would be more than MOP200 million (US$24.8 million) per day, “representing about a 25 percent to 40 percent recovery in total/mass GGR, respectively”.

Though he noted the pace of recovery since “full reopening has been well above estimates as we’ve been writing, in turn having raised the bar”.

The analyst suggested the market was anticipating GGR of circa MOP300 million per day for the whole of January, “implying around a 35 percent to 50 percent recovery in total/mass GGR, versus the first two months of 2019.”

That was “almost nearing the level that can drive the industry’s free cash flow to break-even, i.e., mid-50s of percent of mass recovery,” stated Mr Kim.

“We believe this is still achievable despite the weakish mainland visitation for lunar new year,” he added.