GGRAsia – S&P lifts Macau 2023 mass GGR forecast to 75pct of 2019

S&P lifts Macau 2023 mass GGR forecast to 75pct of 2019

May 16, 2023 Newsdesk Latest News, Macau, Top of the deck

S&P Global Ratings Inc says it now expects Macau’s mass-market gross gaming revenue (GGR) this year to be in the range of 75 percent to 85 percent of 2019 levels, i.e., the last trading year before the onset of the Covid-19 pandemic. That was up from a previous forecast of mass GGR of at least 60 percent of 2019 levels, issued in January.

The recovery in Macau’s GGR in 2023 “has been faster than we anticipated,” said the ratings agency in a series of notes covering some of the city’s casino operators.

Casinos in Macau “are materially outperforming our previous expectations because of a faster recovery in visitation and GGR than we anticipated,” it added.

“We now expect mass GGR to recover to 75 percent to 85 percent of 2019 levels this year and to fully recover in 2024,” stated S&P. “In our view, VIP GGR may stay at 20 percent to 25 percent of 2019 levels in 2023.”

Macau’s casino GGR reached MOP14.72 billion (US$1.83 billion) in April, up 15.6 percent from March. In the first four months of the year, casino GGR stood at MOP49.36 billion, an increase of 141.4 percent from a year earlier, according to official data.

For full-year 2019, Macau recorded market-wide GGR of MOP292.46 billion, with mass revenue – including from slot machines – at MOP157.23 billion.

According to S&P, Macau’s market-wide mass GGR in the first quarter of 2023 “recovered to 67 percent of first quarter 2019 levels and VIP recovered to 23 percent”.

S&P said in its latest update on the Macau market that a “more rapid recovery” in the city’s casino GGR should support “faster improvement” in revenue and cash flow for the city’s operators, helping a “more rapid deleveraging”.

The institution also provided updates on the ratings of some casino firms with Macau operations.

Brighter outlook

The agency revised the rating outlook to ‘positive’ from ‘negative’ for Las Vegas Sands Corp and its Macau unit Sands China Ltd; as well as for Wynn Resorts Ltd and its subsidiaries, including Wynn Macau Ltd.

S&P affirmed the ‘BB+’ issuer credit ratings for Las Vegas Sands and Sands China.

“The positive outlook reflects our expectation that faster-than-anticipated cash flow recovery in Macau coupled with healthy Singapore cash flow will support adjusted leverage improving to about three times by the end of 2023 (a year earlier than we previously expected) and possibly below 2.5 times in 2024,” it stated.

The institution’s updated Macau GGR forecast implied that Wynn Resorts “could reduce leverage below” the “six times upgrade threshold by the end of 2023”, S&P said. It also affirmed the ‘B+’ issuer credit ratings on the gaming operator and its units.

“The positive outlook reflects our expectation that Wynn’s faster than anticipated cash flow recovery in Macau coupled with healthy U.S. cash flow will support adjusted leverage improving to high-five times by the end of 2023,” it added.

In a separate note, S&P revised the rating outlook on Melco Resorts & Entertainment Ltd’s operating subsidiaries, Melco Resorts (Macau) Ltd and Studio City Co Ltd, to ‘stable’ from ‘negative’. It also affirmed the long-term issuer and issue credit ratings on Melco Resorts (Macau) at ‘BB-’ and on Studio City Co at ‘B+’.

“The stable rating outlook reflects our view that Macau’s faster mass-market recovery should allow Melco Resorts to recover its revenue and cash flow strongly in 2023 and reduce its leverage to below our downgrade threshold in late 2023 or early 2024,” said the ratings agency.

S&P also revised the rating outlook of MGM Resorts International to ‘stable’ from ‘negative’, and affirmed the ‘B+’ issuer credit rating on the firm and its subsidiaries.

The stable outlook followed the institution’s expectation that “faster-than-anticipated cash flow recovery in Macau, coupled with healthy [U.S.] domestic cash flow, will support lease adjusted leverage improving to the mid- to high-six times area by the end of 2023, which represents a healthy cushion compared to our 7.5 times downgrade threshold”.