The reopening of Hong Kong’s borders to Macau and Guangdong Province could be aimed for October Golden Week, leaving Macau’s gaming operators with a lengthy wait before returning to profitability, according to investment bank Jefferies.
In a research note published Wednesday, Jefferies analyst Andrew Lee lowered his GGR forecast to reflect a 70% year-on-year decline for FY20, down from a previous forecast of a 45% fall, based largely on delays to a proposed three-way trave bubble between the three jurisdictions.
“The wait for Hong Kong could delay the recovery into 4Q20,” Lee said.
“Hong Kong’s issue is the current third wave of COVID-19 and still officially lacking a universally-recognized health code system. The Hong Kong government noted that Hong Kong would be virus clean if there are no local transmissions for two 14-day incubation periods, which translates to 28 days.
“Hence, we expect the sector is likely to remain loss-making until September and the re-opening target could be timed for China’s Golden Week between 1 to 7 October 2020.
“Based on this, we cut our GGR growth forecasts to decline 70% this year and estimate 3Q20 could be another quarter of EBITDA loss unless operators continue to cut costs. We estimate 2021 GGR rebounding 162% year-on-year; this is still -22% below 2019 levels.”
Lee noted that earnings would not be the key focus for operators during the 2Q20 earnings release season, who will instead look to key recovery drivers.
“The next key driver should be IVS re-issuance and, more importantly, for Guangdong, given this province accounted for 72% of total Chinese issued IVS,” he said.
“We believe the IVS would likely be relaxed on an individual Chinese province-by-province basis and individual cities within each province. Group tours are likely to follow the same relaxation pattern, but is not a key GGR driver.
“We believe this could be a tailored phased recovery to wait for Hong Kong given China/HK/Macau’s focus on the Greater Bay region.”
