The Macau casino market’s “new normal”, once tourists come back to the city in larger numbers, might “not be as good for grind mass” as it would be for so-called premium mass, said a Monday memo from banking group Morgan Stanley.
“The new normal driven by social distancing is particularly negative for grind-mass business due to restriction of three gamblers per table,” said the institution.
In late February, prior to Macau’s casinos reopening following a 15-day pause to contain locally the spread of Covid-19, the local regulator – the Gaming Inspection and Coordination Bureau, a body also known as DICJ – had outlined in a written statement a number of safeguards on operations.
These included: patrons not being allowed to place bets while standing by a gaming table; and bigger gaps between seated players, so that only three to four guests should be permitted to sit at what would ordinarily be a seven-seat gaming table.
“Our analysis suggests more downside for Sands China (with highest exposure to grind mass)” when business returns in greater volume, stated Morgan Stanley. Sands China Ltd is the Macau unit of United States-based Las Vegas Sands Corp.
The terms “grind mass” and “premium mass” are commonly used in the Macau market to distinguish respectively low-stakes mass-market play on the main casino floor, from higher-stakes mass-market play.
Such definitions are not recognised in the gross gaming revenue (GGR) data recorded by the city’s casino regulator. It differentiates only between VIP baccarat; mass-market table games of various categories; and electronic gaming machine play – either via slot machines or so-called live multi-game machines.
Sands China exposure
Morgan Stanley said that – to put its commentary on the grind mass exposure of Sands China into perspective – among the six Macau licensees, “only Sands China discloses mass revenue split (premium mass and grind mass)”.
The institution’s analysts Praveen Choudhary, Gareth Leung and Thomas Allen stated: “We used its respective win/unit/day to back calculate grind mass revenue mix for the industry as well as each of the operators.”
Morgan Stanley estimated that of the circa US$36.6 billion of Macao gross gaming revenue (GGR) in 2019, of which 55 percent was mass revenue, “48 percent of that” was from grind mass, with at weekends up to 10 players per table.
With social distancing measures in place – i.e. as few as three gamblers per table – “we calculate the impact on grind mass revenue could be significant…. the new normal could mean 46-percent lower grind mass revenue when compared to 2019, unless minimum bets are raised meaningfully or social distancing measures are removed,” said the institution.
The bank noted: “We conclude that Wynn Macau [Ltd] has the highest percentage of premium mass revenue, while Sands has the lowest. While the industry could see 19-percent lower mass revenue in 2021 (versus 2019), Sands China could see that down 24 percent due to its highest exposure to grind mass.”
Vitaly Umansky, an analyst at Sanford C. Bernstein Ltd, had said during a Monday panel of casino industry conference ICE Asia, that VIP play was likely to recover more quickly in Macau following the Covid-19 emergency than mass play. That was due to the VIP segment typically depending on much lower volumes of casino players, he said.
In a Monday note, Mr Umansky and his colleagues Eunice Lee and Kelsey Zhu estimated that – while average daily Macau casino GGR for the first seven days of June had been down 93 percent year-on-year – what revenue there was, had been “driven by a very small number of players which drove significant volatility especially in the VIP segment”.
Sanford Bernstein said its channel checks suggested that GGR from June 1 to 7 had been circa MOP400 million (US$50.1 million), with the month-to-date average daily rate at about MOP57 million. The average daily rate in June 2019 had been MOP794 million, noted the brokerage.
(Updated June 10, 5.30pm)
