VIP gross gaming revenue (GGR) in the Macau market was “bad” in the first quarter, “hovering at circa 20 percent of pre- Covid-19 levels,” said a Wednesday note from JP Morgan Securities (Asia Pacific) Ltd.
The mass segment had “fared better” in the three months to March 31, at 39 percent of pre- Covid-19 levels, estimated the institution in a lookahead for first-quarter earnings season for the six Macau casino operators.
The Macau government is yet to publish the data on the structure of market GGR for the first quarter.
JP Morgan noted that the first quarter had a “silver lining” in that VIP and mass respectively were better than the 15 percent and 38 percent of pre- Covid-19 GGR levels seen in the fourth quarter of 2020.
The “steady trend” of improvement in the first quarter was “despite travel curbs and poor travel sentiment into Chinese New Year,” so that GGR “improved every month during the first quarter – in fact, almost every week since Chinese New Year – on pent-up demand,” stated analysts DS Kim, Derek Choi, and Livy Lyu.
First-quarter VIP GGR had been “constrained by supply-side issues,” rather than consumer demand, suggested JP Morgan.
The limitations included “a series of reforms and clampdowns having crippled junkets’ ability to engage with players and provide liquidity,” the institution said.
“We view this as a structural issue and model that VIP GGR can ultimately only recover to about half of pre- Covid-19 levels, despite opening of multiple high-end properties,” noted the analysts.
Grand Lisboa Palace on Cotai, a new large-scale casino resort promoted by SJM Holdings Ltd, is due to open within the first half, this year.
Galaxy International Convention Center (GICC) – part of the coming Phase 3 of the Galaxy Macau casino resort on Cotai, which has positioned itself as serving the upper end of the market – is likely to be launched in stages starting from the second half of this year. That is according to commentary in late February by an executive of promoter Galaxy Entertainment Group Ltd.
JP Morgan said first-quarter estimates indicated mass GGR was “comfortably recovering”.
“Mass demand has been steadily on the rise hitting 40 percent-plus of pre- Covid-19 levels in March, implying premium mass has already recovered to over 50 percent of pre- Covid-19, versus grind-mass at 30 percent-plus,” stated JP Morgan.
The brokerage also suggested there could be a “potential upside” if premium mass “emerges stronger” in a post- Covid-19 environment.
“One can argue that VIP players are not gone, and that the current low demand is a result of them laying low given escalated scrutiny and/or lack of access to capital amidst the junket rout,” said the JP Morgan analysts.
They added: “This suggests that some of these ‘lost VIP/junket players’ could potentially re-emerge as premium mass, especially when capital flow normalises with the re-opening of Hong Kong (recall, many high-end gamblers use Hong Kong as a liquidity hub, via bank and insurance accounts in Hong Kong).”
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"There is still no clarity about when border easing for Macau will occur. In the end these changes are needed to see a rebound for Macau business"
Vitaly Umansky, Louis Li and Shirley Yang
Analysts at brokerage Sanford C. Bernstein