Macau’s six gaming concessionaires all have “at least six months of breathing room” before needing to draw on any additional debt financing in the face of liquidity concerns, according to brokerage Bernstein.
However, the current revenue drought brought on by ever-tightening border restrictions aimed at preventing the spread of COVID-19 has some companies placed more precariously than others, with Galaxy Entertainment Group deemed “least risky” while the Melco Resorts & Entertainment entity running Studio City has the least liquidity available.
In a Thursday note, Bernstein analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu noted that liquidity concerns were the major driver of negative stock performance of Macau’s casino operators in recent months, but stated, “While there are no medium-term (less than six months) concerns around liquidity, the longer the revenue drought continues, the spotlight will shine brighter on individual companies’ liquidity.
“All operators have at least six months or so of breathing room before needing to draw on any additional debt financing, which all operators will be able to do via their revolvers at a minimum (before needing to find other liquidity).
“If the no-revenue environment were to last longer, all operators have at least 15 months or so of breathing room (except for Studio City, which has only a year) before running out of existing liquidity.”
Galaxy is the only operator in a net cash position, currently at HK$43.46 billion (US$5.6 billion) – with enough net cash to ride out the storm for 40 months. Wynn Macau is also strongly placed with cash on hand to last 17 months and total liquidity for 21 months, with SJM at 15 months and 25 months respectively.
At the other end of the spectrum, MGM China and Sands China have cash on hand to last just six months, with total liquidity for 15 months.
Studio City has the least liquidity of any company with enough for just 12 months, although Melco Resorts’ consolidated position gives it cash on hand for 11 months and total liquidity for 21.
Bernstein’s analysis, coming after Macau’s DICJ reported a 79.7% year-on-year decline in GGR for March, assumes a worst case scenario in which operators essentially face a no-revenue environment.
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