Moody’s Investors Service expects Macau’s gross gaming revenue (GGR) this year to be about 45 percent of 2019’s level, i.e., the period before the onset of the Covid-19 pandemic. The institution stated the city’s GGR could rise to 60 percent of 2019’s next year, compared to 14 percent in 2022.
“This is because of the extent of deterioration during the pandemic, and strict regulations on junket operations that will constrain the VIP segment,” said the ratings agency in a Thursday report.
Casino GGR in Macau was just below MOP292.46 billion (US$36.5 billion) in full-year 2019, before the global health crisis took hold.
Macau cancelled with effect from January 8 this year, most of its travel restrictions related to the Covid-19 pandemic, dropping all testing requirements for inbound travellers from mainland China, Hong Kong and Taiwan.
China’s long-awaited reopening is a “huge boon” to gaming companies in Macau, “which have historically been heavily dependent on tourist arrivals from the mainland and Hong Kong,” stated the institution.
“Since then, there has been a surge in visitor arrivals and a significant acceleration in Macau’s gross gaming revenue,” it added.
In the first two months of 2023, Macau’s GGR stood at just above MOP21.90 billion, about 43.5 percent of the levels reached in the first two months of 2019.
“In comparison, GGR was only at 14 percent of corresponding 2019 levels in the fourth quarter of 2022,” said Moody’s.
According to Moody’s, Macau’s mass-market segment “will drive” the overall increase in market-wide GGR. “We estimate that the mass-market GGR will improve to 75 percent and 100 percent of 2019 levels in 2023 and 2024, respectively,” it added.
The number of visitor arrivals in the first two months of 2023 expanded by 121.6 percent year-on-year to circa 2.99 million, according to official data. The two-month tally accounted for 52.5 percent of total arrivals in 2022.
Moody’s also said it expected Macau casino operators’ earnings to “increase significantly” over the next two to three years “from a very low base in 2022”.
However, it warned that earnings of Macau-focused companies, such as SJM Holdings Ltd and Melco Resorts & Entertainment Ltd, “will not return to pre-pandemic levels until 2024”. That was “partly because of their shrunken VIP businesses and also amid ramp-up costs at their new properties,” it added.
Financial leverage for the Macau-focused companies is likely to “remain very high until 2024, because of the large increase in adjusted debt over the past three years,” stated the ratings agency. “This was a result of pandemic-driven weak earnings and operating cash flow, and to fund capital spending.”
