S&P Global Ratings expects Macau’s mass gross gaming revenue (GGR) in the fourth quarter this year to be “equal to… fourth quarter of 2019,” the last trading year before the onset of the Covid-19 pandemic. The city’s market-wide mass GGR “is recovering faster” than the ratings institution had forecast, added the memo.
“We now expect the region’s fourth-quarter mass GGR will be equal to its levels in the fourth quarter of 2019,” said the ratings agency. “We anticipate its 2024 mass GGR will be 5 percent to 15 percent stronger than in 2019,” it added in a note covering U.S.-based casino operator Wynn Resorts Ltd, and its subsidiary Wynn Macau Ltd.
In the third quarter of 2023, Macau’s market-wide mass GGR “recovered to 93 percent” of third-quarter 2019 levels, while VIP GGR “recovered to 38 percent”, said the institution, based on the six operators’ reported numbers.
“Multiple operators indicated mass volume during the October Golden Week surpassed 2019 levels and that the momentum has continued into November,” added S&P Global, referring to an autumn holiday period for residents of the Chinese mainland.
“Our 2024 forecast implies about a 20 percent to 30 percent year-over-year increase,” observed the ratings agency, adding that the “strong momentum” in Macau’s mass GGR year-to-date “mainly stems from the premium segment”.
“Further improvements” in the number of visitor arrivals to Macau, “along with a recovery in airlift capacity to Macau and Hong Kong, will likely support a further expansion in mass GGR next year,” it suggested.
Macau “will also face an easy year-over-year comparison in the first quarter of 2024 because, while coronavirus-related restrictions were relaxed in January 2023, it took some time for the market’s recovery to accelerate,” according to the note.
Despite the expected growth in mass-market revenue, VIP volumes “will roughly remain at current levels,” it added. “It is unlikely that casino operators will significantly expand their junket VIP operations given the tightened regulations.”
S&P Global also said it raised its issuer credit rating on Wynn Resorts and Wynn Macau Ltd, to ‘BB-‘ from ‘B+’.
The “stable” outlook on the casino group reflects the institution’s expectation that the “ongoing recovery cash flow in Macau, along with relatively stable U.S. cash flow next year, will likely support an improvement” in the parent group’s leverage “to the high-4x area, from low-5x in 2023, despite its increasing development spending and shareholder returns.”
S&P Global said large-scale development projects “could increase” Wynn Resorts’ leverage relative to the institution’s base case. But it added: “We don’t expect the company will experience the leveraging effects of any large-scale development projects for at least the next 18 to 24 months.”
In Macau, Wynn Macau Ltd has pledged to invest US$2.2 billion over its new, 10- year concession, of which it will use about US$2.05 billion for non-gaming capital projects and event programming, including a “mixture of capital expenditure (capex) and operating expenses”.
“We believe this will be manageable for Wynn Macau Ltd as Macau’s GGR recovers,” stated the ratings agency. “We expect that these large-scale capex projects will likely require design, planning, and government approval before initiating construction.”
Wynn Macau Ltd has publicly indicated its expectation for US$300 million to US$400 million of capex related to its concession commitments between the fourth quarter of 2023 and the end of 2024.
