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Macau March GGR to dip as much as 80pct: analysts

http://www.ggrasia.com/macau-march-ggr-to-dip-as-much-as-80pct-analysts/
Mar 17, 2020

Macau casino gross gaming revenue (GGR) is expected to fall in the range of 70 percent to 80 percent in March in year-on-year terms, suggest a number of brokerages. That comes after February recorded the lowest monthly level of GGR since 2004, according to official data.

JP Morgan Securities (Asia Pacific) Ltd said in a Monday note that March gaming revenue in Macau was faring “a little better, but still bad” compared to the prior month. Based on the institution’s own checks, Macau GGR for the first 15 days of March was estimated at MOP2.85 billion (US$356.2 million), or circa MOP190 million a day, “down 75 percent to 80 percent year-on-year”.

According to the brokerage, the result implied that last week’s GGR run-rate was MOP205 million to MOP210 million a day. “While this is slightly better than the circa MOP170 million/day in the previous week, we think week-on-week trend is almost meaningless at this point as it is will continue to be extremely volatile, driven by a small group of players,” said analysts DS Kim, Derek Choi and Jeremy An.

They added: “VIP seems to be faring better (down 70 percent to 75 percent year-on-year) than mass (down 80 percent to 85 percent), which is also within expectations and not very telling” in terms of meaningful patterns.

Another brokerage, Sanford C. Bernstein Ltd, stated in a Monday memo that last week’s average daily rate (ADR) “improved slightly” but month-to-date ADR was still down 77 percent compared to March 2019, as Macau continued to suffer from the ongoing coronavirus pandemic.

“We estimate VIP has been stronger than mass, with high hold in VIP (over 4 percent) and significant volatility,” wrote analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu.

The institution said it estimated March GGR to be down 75 percent to 80 percent, assuming no significant improvement in visa issuance and travel to Macau. JP Morgan said also it modelled GGR to sink between 70 percent to 80 percent in March and about 35 percent in the second quarter, based on the brokerage’s “guestimate that travel restrictions could be lifted as early as April, which then will be followed by a ‘gradual’ recovery in demand until year-end.”

Covid-19 measures

Brokerage Nomura’s Instinet LLC said on Friday note that there was a possibility the authorities in mainland China might by April or May ease travel conditions to Macau.

As part of efforts to contain the spread of the Covid-19 virus, a number of restrictions has been put in place – including the temporary suspension, reportedly since late January, of new exit visas under China’s individual visit scheme (IVS). Tour groups from the mainland to Macau are also suspended. Such restrictions had resulted in a dramatic reduction in the normal levels of cross-border traffic between Macau and the mainland.

Macau recorded two new imported cases of Covid-19 respectively on Sunday and Monday. The first case involved the infection of a South Korean woman that works in the city and had just returned from a trip to Portugal. The second new case of imported infection involved a male citizen of Spain, said to do business in Macao. His infection was detected upon his arrival at Macau International Airport.

The Macau government had announced that from Tuesday (March 17) all visitors to Macau who have travelled – in the 14 days prior to arrival – anywhere outside Greater China would be subject to 14-day medical observation. In this context, that means anyone who has travelled in that time to places other than mainland China, Hong Kong and Taiwan.

JP Morgan said the measure “won’t have a big impact” on Macau’s gaming industry, “given significant concentration of Macau’s GGR comes from Chinese players.”

“While we embrace near-term concerns on horrid GGR trends and sell-side earnings cuts, we believe most of the cuts will be done by next month (post-March GGR, plus possible resumption of Macau IVS), after which we expect these stocks to grind higher on ‘less bad’ trends and normalising multiples,” stated the brokerage.