GGRAsia – Macau GGR comeback to 2019 levels only in 2022: Nomura

Macau GGR comeback to 2019 levels only in 2022: Nomura

Apr 20, 2020 Newsdesk Latest News, Macau, Top of the deck

Macau casino gross gaming revenue (GGR) might only return to approximately “90 percent” of 2019 levels by the year 2022. That is according to a Friday note from banking group Nomura’s research arm, Instinet LLC.

The institution had already flagged in an April 13 note that the Macau market might start to see a return from June onward of a meaningful number of mainland tourists, and by 2021 might recover to circa 60 percent of 2019 GGR levels.

It said on Friday: “As China reopens the borders and the Individual Visit Scheme system is restarted province by province, we expect 2021 GGR to recover to over 60 percent of 2019 [levels] and to approximately 90 percent in 2022.” The Individual Visit Scheme (IVS) is a exit visa system for certain mainland China residents allowing them independent travel to Macau and Hong Kong.

Nomura analysts Harry Curtis, Daniel Adam and Brian Dobson further stated: “Our new estimates … are based on analysis that has EBITDA [earnings before interest, taxation, depreciation and amortisation] returning to approximately 80 percent of peak.”

The institution suggested that some of the casino operators that it covers – with operations in Macau – might “get back” to the 2019-level of EBITDA by 2022. Wynn Resorts Ltd should be able to achieve US$1.1 billion of EBITDA in Macau by 2020, with the recovery in Las Vegas, Nevada in the United States, “likely to be slower”.

Melco Resorts and Entertainment Ltd’s EBITDA in Macau “should recover” to US$1.13 billion, “with a larger portion generated at City of Dreams since VIP tables were shifted away from [majority-owned] Studio City in first quarter 2020,” stated Nomura’s research arm.

MGM Resorts International might achieve US$2.3 billion of EBITDA by 2022, with about US$565 million contributed by the group’s operations in Macau, it stated.

By 2022, Las Vegas Sands’ EBITDA should recover to US$4.3 billion, “with the stronger rebound in Singapore and Macau than in the far less Las Vegas market,” added the institution.

So-called social-distancing rules regarding spacing between players at gaming tables might however have a role in “capping” GGR performance for one or two quarters even after tourists start to return in numbers to the Macau casino market said Nomura.

Rules regarding the proximity of in-use tables for casino table games and limits on the tally of players at tables were introduced in the Macau market following a 15-day closure of the city’s casinos in the first half of February. The latter was part of local measures against a novel coronavirus and its associated infection Covid-19. Social distancing measures also apply to slot machines.

Macau has had 11 days without a new case of Covid-19 infection, according to information from the city’s government.

Singapore, Manila recovery

A Thursday note from Carlo Santarelli and Steven Pizzella at Deutsche Bank Securities Inc had said they expected Macau would be the casino market “earliest to get off the mat” from a market-fundamentals perspective, followed by the United States domestic regional markets, and “lastly”, the Las Vegas Strip in Nevada.

Nomura for its part stated that U.S. regional casino markets and the Singapore duopoly shared by Las Vegas Sands and Genting Singapore Ltd, had business models with significant “local demand”. In those markets, Nomura expected the pace of recovery to be “more like Macau’s”, with EBITDA “returning to approximately 80 percent of 2019 peak by 2022”.

On April 6 it had been announced that Singapore’s two casino resorts – Marina Bays Sands and Resorts World Sentosa – were being closed for four weeks, as the city-state’s government upped efforts to contain the further spread of Covid-19 disease there.

Referring to Melco Resorts, which has a unit that runs operations at the City of Dreams Manila casino resort in the Philippines, Nomura said: “We forecast that the recovery in Manila” would be “less robust since Chinese junket operators are likely to feel continued pressure from Beijing to keep Chinese revenues on Chinese soil.”

An April 7 it had been announced by the Philippine government that a community lockdown on the main island of Luzon – applicable also to the casino resorts at Entertainment City, including City of Dreams Manila – was being extended to April 30.