Macau March GGR to dip 70pct plus after weak Feb: analysts
Macau casino gross gaming revenue (GGR) is expected to fall more than 70 percent in March in year-on-year terms, suggest several brokerages. That comes just after February recorded the lowest monthly level of GGR since 2004, according to official data.
Macau’s casino industry recorded MOP3.1 billion (US$387 million) in GGR for February, down 87.8 percent from the prior-year period, said on Sunday the Gaming Inspection and Coordination Bureau, a body also known as DICJ. Last month’s result was 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.
JP Morgan Securities (Asia Pacific) Ltd said in a Sunday note that the February result was “not meaningful” given disruption in the Macau market since early February, namely “lack of Macau visas, limited transport options, hours-long health check at the border, potential 14-day quarantine, mandatory face masks”.
“The daily run-rate was MOP107 million in February, implying [above] MOP220 million/day during 14 days of operation for the month, which is equivalent to [circa] 30 percent of second half 2019 run-rate (MOP777 million/day),” said the brokerage.
The JP Morgan team suggested that the VIP segment “should have fared better” than the mass-market sector. “We estimate that VIP dropped about 80 percent while mass fell over 90 percent year-on-year, but we wouldn’t read too much into this, as the trend was and will be extremely volatile during these periods,” stated the institution.
Some of the city’s casinos started to reopen on February 20, but the government gave operators the option of applying for a grace period of up to 30 days before relaunch. Resumption of gaming was however conditional on operators taking special precautions at the request of DICJ, in terms of density of seating for customers at gaming tables, and ensuring there was a certain minimum space between tables in use.
Another brokerage, Sanford C. Bernstein Ltd, suggested in its Sunday note that since February 20, the VIP sector “has been stronger than mass, with high volatility – which is not surprising”.
The institution noted that forecasts for the near term – i.e., first-half 2020 – were “largely guesses at this time, with the biggest variables now being when travel restrictions from China will be lifted”.
“We estimate March potentially to be down between 75 percent to 80 percent (assuming no significant improvement in visa issuance and travel), this would imply an average daily revenue of MOP165 million to MOP210 million,” stated Sanford Bernstein. It added: “The operators we have spoken with do not see any clarity on timing of recovery at this time.”
In a Monday memo, investment bank Deutsche Bank AG said it now expected March GGR to decline 71 percent in year-on-year terms. The institution stated that post the February result and “the reset for current market conditions,” its first quarter 2020 GGR forecast for the Macau market is now -57 percent, from -41 percent previously. The full-year 2020 is now -33 percent (previously -17 percent).
“We assume growth recommences in 2021, off the low base, post second-half 2020 trends slowly returning to normalised levels,” said the Deutsche Bank analysts.
JP Morgan said also it “modelled GGR to sink 70 percent in March” and circa 35 percent in the second quarter, followed by some stabilisation from third quarter (-8 percent) and into fourth quarter (+5 percent). “This leads us to forecast 2020 GGR to drop 24 percent and industry earnings before interest, taxation, depreciation and amortisation, to drop 30 percent,” it added.
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