Macau’s casino operators can reach break-even EBITDA in 2020 with average gross gaming revenue of better than MOP$305 million per day, and cash flow break-even with MOP$395 million per day, according to JP Morgan.
In a Monday note analyzing cash burn and liquidity given the absence of most gaming business due to border restrictions in the wake of COVID-19, analysts DS Kim, Derek Choi and Jeremy An note that the break-even figures represent around 40% of 2019 EBITDA and 50% of cash flow.
That mark remains somewhat distant for now given that Average Daily Revenue in March was just MOP$170 million – less than half the required cash flow level – with predictions it will fall as low as MOP$70 million in April.
Nevertheless, even in a worse case “near-zero revenue” period, JP Morgan says all six Macau concessionaires have “ample liquidity” to survive for over a year, and up to six years in the case of cashed-up Galaxy Entertainment Group.
Ranked by liquidity, including cash and financial instruments plus revolver capacity, Galaxy remains particularly well-placed with US$6.8 billion behind, followed by US$4.5 billion for Sands China, US$3.3 billion for SJM, US$2.7 billion for Melco Resorts, US$2.2 billion for Wynn and US$1 billion for MGM China.
“Against their respective cash-burn, Galaxy has enough cash to survive 6+ years of no revenue (or 5 years even if it finishes Phase 3), SJM has four years (or three years even if it finishes Grand Lisboa Palace), Sands/Melco/Wynn have about two years, and MGM over a year,” JP Morgan said.
The investment bank also noted that Macau’s operators have light maintenance covenants with maturities still “many years away.”
“Sands and MGM have already got a waiver until mid-2021 … Wynn and Melco have favorable loan structure that allows them to easily pass the covenant tests while they have more than enough cash on hand anyway (and) Galaxy and SJM are in net-cash position,” the analysts said.
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