Casino firm Melco Resorts and Entertainment Ltd gained 6.4 percentage points of Macau market share in terms of gross gaming revenue (GGR) judged year-on-year in the first quarter, notwithstanding its US$364-million loss in the period. The reported share gain came at a time when the Covid-19 pandemic was already affecting gaming business in Macau as well as globally.
Brokerage Sanford C. Bernstein Ltd cited operator data, its own estimates and analysis as evidence of the GGR share performance. Melco Resorts’ Macau operation “took 21.4 percent market share in the first quarter, versus 15 percent in the first quarter 2019 and 17 percent in the fourth quarter 2019,” wrote analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu.
“We estimate Melco [Resorts] gained share in both VIP and mass,” the analysts added in commentary after the casino group reported its first-quarter earnings on Thursday.
The institution estimated the gaming operator’s first-quarter share of VIP GGR was 30 percent, versus 16 percent in first-quarter 2019 and 20 percent in fourth-quarter 2019. Sanford Bernstein calculated Melco Resorts’ share of Macau mass GGR was 16 percent in the first three months of this year, versus 14 percent in first-quarter 2019 and 15 percent in fourth-quarter 2019.
The casino group was “set up to benefit from high-end recovery, when it comes,” stated Sanford Bernstein.
During the casino group’s earnings conference call, management suggested earnings should not be hurt even if so-called social distancing measures are retained when tourists start to return in larger numbers. Currently on Macau gaming floors there are controls in place in terms of distance between players at a gaming table or bank of slot machines; and the number of players permitted at a gaming table.
David Sisk, chief operating officer of Macau resorts, and president of the City of Dreams property in Macau, said on the earnings call the Macau operation was “skewed towards the higher-end players”.
He added: “I think our players are going to be okay with the distancing. We’ve never had the properties that have the most people in them.”
Nomura’s research arm Instinet LLC noted in its Thursday memo on the quarterly performance that Melco Resorts had added “US$54-million to its bad-debt provision” for the period. It said that was “probably due to timing” of rules making cross-border travel more difficult, “as customers were not able to pay off markers, which usually occurs upon return” to Macau.
“We view the increase as one of timing rather than credit quality,” stated Harry Curtis, Daniel Adam and Brian Dobson.
The brokerage said it was increasing its estimates for Melco Resorts’ 2020 earnings before interest, taxation, depreciation and amortisation, due to a “lower daily operating loss” of US$2.2 million; an estimated break-even level at “only about 35 percent of pre-crisis revenues”; and “hopes for return to normalcy in first-quarter 2021”.
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"The most worrying [thing] is whether [mainland] China will again tighten the issuance of travel visas [for visits to Macau]"
Luiz Lam Kai Kuong
Macau junket investor