Macau’s concessionaires are, for the most part, well-placed to ride out liquidity concerns linked to COVID-19 and related border restrictions, despite such concerns continuing to suppress stock performance.
The mostly positive view is expressed in a note from brokerage Bernstein on Friday in which analysts Vitaly Umansky, Louis Li and Shirley Yang assess the individual liquidity positions of all six concessionaires.
While the analysts note that SJM Holdings, which is yet to confirm long-awaited bank refinancing, would have only three months’ worth of cash on hand under a “worst case” scenario of zero revenue – essentially meaning a complete closure of either Macau’s casinos or its borders – more realistic scenarios paint a far rosier picture.
“Under a more reasonable zero-EBITDA environment, cash burn (including liquidity from credit facilities) increases to seven months for SJM, 17 months for Studio City and over 30 months for all others,” they write.
“Under a scenario where EBITDA returns to best quarter EBITDA for each operator (since COVID-19 began, most operators recorded best quarter in 2Q21), cash burn decreases significantly.”
In a zero-revenue environment, Bernstein calculates just three months of total liquidity for SJM, 12 months for Sands China, 14 months for Wynn Macau, 22 months for MGM China, 26 months for Melco Resorts – not including Studio City) – and 30 months for Galaxy Entertainment Group. Studio City, which is majority owned by Melco, has around 14 months of total liquidity available.
Should concessionaires reach break-even EBITDA, those numbers extend to seven months for SJM, 32 months for Sands China, 36 months for Wynn Macau, 48 months for Galaxy, 55 months for MGM China and 62 months for Melco, with Studio City extending to 17 months.
However, the analysts also remain confident that all six concessionaires will continue to garner the support of their banks.
“Operators have been able to have covenants waived into 2023 (and 2024 for MGM China) and there are no near-term debt maturities that raise concerns,” they said.
“If covenant waivers need to be extended, we expect banks to give such waivers. The ability to reduce cash expenses from current levels is limited, although operators could potentially cut further back on capex and some other minor costs.”
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