Macau’s gross gaming revenue will likely start showing some gradual improvement from the middle of this month, according to investment bank JP Morgan, although it will likely be another two months before gaming operators can expect to break-even.
In a Sunday note following publication of Macau’s July GGR numbers by the Gaming Inspection and Coordination Bureau (DICJ), which showed another month of significant declines, JP Morgan analysts DS Kim, Derek Choi and Jeremy An said it would take some time before a recent easing of border restrictions with mainland China begin to take effect.
“As well-expected, the Macau-Guangdong ‘travel bubble’ – which kicked off on 15 July – has been of little help to gaming demand, as the issuance of tourist visas (IVS or package-tour) is still suspended,” they said.
“Business permits, which can be used by hardcore high-end players, take three to five weeks to be arranged/issued. We thus wouldn’t read much into this print, as we still expect GGR to gradually improve starting in mid-August, particularly for VIPs, with some hard-core players returning via business permits.”
While the return of tourist-style visas under the Individual Visit Scheme are seen as the key in jump-starting Macau’s gaming economy, JP Morgan still sees improvement showing from this month onwards with GGR estimated to decline by around 85% year-on-year in August (versus more than 90% for the past four months), then 70% in September and 50% in October.
“Note this 50% mark is important as all six operators can print positive EBITDA, with break-even points hovering around 35% to 45% of 2019 levels,” the analysts said.
“For quarterly, we expect GGR to recover to 55% to 60% of 2019 levels in 4Q20, 85% in 1Q21 and 90% in 2Q21, before finally hitting 100% in 3Q21.”
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