Macau GGR might dip 37pct in 2020: Bernstein
Macau casino gross gaming revenue (GGR) could see a 37 percent year-on-year contraction in 2020, followed by a “strong recovery” in 2021, brokerage Sanford C. Bernstein Ltd said in a Thursday note.
The institution said its latest Macau forecast was for VIP GGR to decline by 36 percent year-on-year in 2020, while mass-market GGR might dip by 38 percent. It said the updated numbers were in light of the various travel restrictions in place to combat the novel coronavirus pandemic.
The brokerage reckoned that Macau’s GGR could see a “solid 74-percent rebound” in terms of year-on-year growth, in 2021. It assumes authorities in mainland China – a key source market for Macau gaming patrons – resume from May China’s exit visa scheme for independent travellers – known as the individual visit scheme (IVS), then resume issuing group-tour visas in the “latter part of summer” 2020.
The restart of Macau’s transport links to its feeder markets as well as an expected gradual improvement in China’s economy with the fourth quarter in likelihood “back to normal levels” of growth help form Sanford Bernstein’s view, according to its Thursday note.
There has been no clarity so far regarding when the IVS programme might restart, with Macau’s gaming and tourism trade – including its junket segment - much battered by the virus crisis.
In a Wednesday press conference, the city’s Secretary for Economy and Finance, Lei Wai Nong, said the city’s government could only make representations for resumption of the IVS programme – a matter that would in any case require approval from China’s central government – once the novel coronavirus situation “further stabilises” in Macau and mainland China.
Recovery high-end led
Bernstein analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu wrote in their Thursday report: “The key question surrounding Macau recovery will be the timing of… visa issuance…” and visitor numbers going back to “normal levels”.
They added: “Initially, we see a disproportionate recovery of higher-end premium mass and VIP, with base mass/grind mass recovering more slowly,”
They further stated: “It is more likely that high-end players travel to Macau with visas (such as business visas or transit visas) other than IVS or group travel visas, which are more likely to be resumed” at a “slower” pace.
Macau casino operator Galaxy Entertainment Group Ltd would be a “beneficiary” of an expected high-end led recovery in the city’s gaming market due to its strength in VIP and premium mass play, the brokerage concluded. It also highlighted in the note Galaxy Entertainment’s strong liquidity and minimal debt.
“Longer term, the opening of Galaxy Macau Phase 3 will add significant capacity and boost Galaxy’s mass (and premium mass) offering. Mass remains the key long-term value driver for Macau, and Galaxy will stand to gain share in 2021 and beyond,” the brokerage remarked.
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