GGRAsia – Jefferies ups Macau 2020 GGR dip forecast to 45pct

Jefferies ups Macau 2020 GGR dip forecast to 45pct

Mar 24, 2020 Newsdesk Latest News, Macau, Top of the deck

The brokerage arm of Jefferies Group LLC says it has upped its 2020 forecast for contraction in Macau casino gross gaming revenue (GGR) by 29 percentage points, “to reflect global economic slowdown with heightened awareness of social distancing and visa/travel restrictions”.

In a Monday memo, Hong Kong-based analyst Andrew Lee said the institution now estimated Macau’s 2020 GGR would decline by 45.0 percent year-on-year. The brokerage thinks the first half will drive the slump, with a dip of 62.9 percent, with some easing in the second half, to 26.2 percent year-on-year deterioration.

The “slow recovery” might start in the second quarter, suggested Jefferies, with a Macau market rebound to growth of 32.9 percent in 2021. The institution’s previous forecast had been for GGR to fall 16.0 percent in 2020, and to grow by 9.2 percent in 2021.

The city’s gaming regulator had on March 1 announced that Macau’s February casino gross gaming revenue had declined by 87.8 percent in year-on-year terms, negatively affected by factors including a 15-day shutdown ordered by the city’s government as part of the efforts to contain the spread locally of the Covid-19 disease.

Jefferies’ Mr Lee stated on Monday: “We maintain our conservative stance with the sector currently loss-making as we believe recovery is predicated on visa/travel restrictions easing.”

On Tuesday, Macau’s leader, Chief Executive Ho Iat Seng, had announced that Hong Kong residents – a remaining staple of the currently much-reduced tourism to Macau – would have to undergo quarantine in a Macau government-designated hotel upon entering Macau. Additionally, Mr Ho said that any Hong Kong resident that had been to a foreign country within 14 days of their intended visit to Macau would not be allowed to enter the city at all.

Hong Kong provided 62,489 instances of Macau’s 156,394 visitor-entries – i.e., 40 percent – during February, according to Macau government data released on Friday. The aggregate of visitor arrivals to Macau in February 2020 “plunged” by 95.6 percent year-on-year, said the city’s Statistics and Census Service.

Covid-19 new cases

Jefferies’ Mr Lee mentioned in his Monday note that a “second wave of Covid-19 cases” in Macau – involving people carrying infection acquired abroad – “could delay” the horizon for the easing of travel restrictions to Macau.

On Monday the Macau authorities announced a 25th case of Covid-19 infection – involving a quarantined non-resident worker that recently returned to the city. That meant there had by that date been 15 cases of imported infection, compared to 10 cases in first wave in late January and early February, where all those patients successfully recovered.

Another brokerage, Sanford C. Bernstein Ltd, noted in a Monday memo that individual visit scheme (IVS) exit permits and group visas for mainlanders wishing to visit Macau “remained suspended and most transport is severely disrupted”.

Analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu wrote: “Visitation into Macau, while slowly improving, remains abysmal…”

They cited data indicating 5,000 tourists daily in late February; 8,000 on average per day in early March; rising to approximately 10,000 visitors per day in the second week of March; but with numbers dropping to 7,000 daily in the third week of the month “dramatically below the 100,000-plus normal average”.

Sanford Bernstein said it estimated – based on “channel checks” – that Macau’s GGR for March 1 to 22 was approximately MOP4.0 billion (US$500.7 million) with a month-to-date average daily rate (ADR) of about MOP182 million.

It said the average daily rate “worsened” to MOP164 million for the week of March 16 to 22.

The institution estimated that the month-to-date ADR was down by 78 percent compared to March 2019, when it stood at MOP834 million.

“We estimate VIP has been stronger than mass, with high hold in VIP – approximately 4 percent – and significant volatility on a smaller group of players,” said the brokerage.