Big Macau, No Cheese

Macau, South East Asia’s premier gambling hub, may be back in business but there’s mixed news on near-future revenues.

It will be at least two-years before the resort’s casino Gross Gaming Revenue (GGR) will return to approximately “90 per cent” of 2019 levels.

That’s the prediction from Instinet LLC, the research arm of blue-chip Japanese banking group Nomura.

The Macau market will start to breathe again from June onwards, say Nomura, with a “meaningful” return of China mainland punters. They estimate CGR will recover to around 60 per cent of 2019’s posted figure by 2021.

“As China reopens the borders and the Individual Visit Scheme (IVS) system is restarted province-by-province, we expect 2021 GGR to recover to over 60 per cent of 2019 levels and to approximately 90 per cent in 2022,’” Instinet said in a recently-published special Note.

The IVS is an exit visa system for certain Mainland China residents allowing them independent travel to Macau and Hong Kong.

Nomura estimates are based on analysis that earnings before interest, taxation, depreciation and amortisation, or EBITDA, return to around 80 per cent of peak.

Big hitter Wynn Resorts Ltd should be able to achieve US$1.1 billion of EBITDA in Macau by 2020, although Wynn’s recovery in its Las Vegas operations are “likely to be slower”, said Nomura.

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.

Meanwhile, 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, said Nomura.

Looking to 2022, overall Macau and Singapore will have a stronger earnings rebound than Las Vegas, predicts Instinet LLC.

They say that social-distancing rules will suppress action at gaming tables and may very well have a role in “capping” GGR performance for one or two quarters — even after gamers return in numbers to Macau casinos.

Social-distancing measures also apply to slot machines.

Nomura’s mixed-news Macau boost was underscored by Deutsche Bank Securities Inc., who said in their own special Note that they too expected the former Portuguese colony to be the casino market “earliest to get off the mat”.

From a market-fundamentals perspective, Macau would lead, followed by US domestic regional markets and then the Vegas Strip in Nevada, said Deutsche Bank.

US regional casino markets and the Singapore duopoly, shared by Las Vegas Sands and Genting Singapore Ltd, had business models with significant “local demand,” said Nomura.

In these markets, Nomura expects the pace of recovery to parallel Macau’s; with EBITDA returning to approximately 80 per cent of 2019 peak by 2022.

Big Macau is back on the gaming menu. Even if, for the moment, it’s an order of hold the extra cheese.

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