GGRAsia – Fitch expects Macau 2022 GGR at 44pct of pre-Covid level

Fitch expects Macau 2022 GGR at 44pct of pre-Covid level

Apr 08, 2022 Newsdesk Latest News, Macau, Top of the deck

Fitch Ratings Inc says it expects Macau’s gross gaming revenue (GGR) this year to be “about 44 percent of its pre-pandemic level”. The latter is understood to be a reference to 2019, before the onset of the Covid-19 pandemic.

Casino GGR in Macau was just below MOP292.46 billion (US$36.5 billion) in full-year 2019, before the health crisis took hold. According to Fitch estimates, the city’s casino GGR would reach about MOP129 billion this year.

Fitch forecasts Macau’s economy will expand by 19 percent in 2022, based on an assumption that the city’s gaming revenue “will recover to about 44 percent of its pre-pandemic level”, said the institution in a Thursday report.

The Macau government has forecast casino GGR at MOP130 billion for 2022, 44.5 percent down on 2019 levels, assuming there are no local outbreaks of Covid-19.

Aggregate casino GGR in the first quarter of 2022 stood at MOP17.77 billion, a decrease of 24.8 percent in year-on-year terms. Such revenue amounted to just 23.3 percent of the casino GGR recorded in the first three months of 2019.

In its latest memo on Macau, Fitch said it assumed “the gaming tourism recovery should pick up momentum in the second half of 2022, underpinned by a gradual resumption of inbound tourism from mainland China.” But the ratings agency stated that “the timeline for full normalisation of mainland tourism and easing of international border restrictions remains uncertain, and depends on the further development of the pandemic and containment policies.”

It added: “The VIP gaming segment in particular would remain sensitive to regulatory changes in Macau or mainland China.”

Macau’s VIP gambling trade has seen a decline in business in recent years, coupled with tightened supervision from authorities in Macau and mainland China. The trend accelerated with the November detention of Alvin Chau Cheok Wa, on suspicion of promoting cross-border gambling overseas to mainland China customers, and the cessation of business at his junket brand Suncity Group.

In January this year, the VIP trade saw the arrest of Levo Chan Weng Lin, boss of junket brand Tak Chun, on suspicion of being a triad leader.

Brokerage Sanford C Bernstein Ltd said in a Friday memo it expected to see “more normal” visitor flows to Macau in May and June, following travel restrictions earlier in the year because of Covid-19 outbreaks in mainland China and Hong Kong.

The institution said it expected “quarter-on-quarter improvement” in the third quarter this year, and for the fourth quarter “to see the opening of Hong Kong travel with Macau and China, and the loosening of visa restrictions for travel from China into Macau.”

In a reference to the end of the six current casino concessions and sub-concessions, and a government-backed bill currently under discussion in the city’s Legislative Assembly to amend the existing gaming law, Fitch said it believed “the authorities will ensure that concession renewals and revisions to the gaming law facilitate the sustainable development of the gaming sector and a rising contribution from non-gaming activities”.

The ratings agency added: “However, progress is unlikely to be sufficient to reduce the territory’s dependence on the gaming industry in the near term.”

Macau’s six casino operators have already applied to the Macau government for an extension until December 31 of their existing rights, as made feasible by the local authorities. The current licences are due to expire on June 26. The extension gives time for the Macau government to prepare a new public tender for Macau gaming permits.