The resumption of the long-awaited Individual Visit Scheme (IVS) for residents of Zhuhai to enter Macau represents the most significant step yet on the SAR’s road to recovery, opening the door for visas for the rest of mainland China to be resumed in time for the lucrative October Golden Week.
According to JP Morgan’s DS Kim, Derek Choi and Jeremy An, the sudden timing and scope of the travel easing is “better than our expectations” and suggests further expansion of IVS to the rest of Guangdong Province could take place before the end of the month.
Their comments follow news on Monday that both IVS for Zhuhai residents and business visas for all of China would resume from 12 August – the latter measure removing the last of the quarantine requirements between the two jurisdictions.
“Barring a second wave of COVID-19 in Macau, we are even more comfortable in expecting that a gradual resumption of travel visas should come in from here, say, for Guangdong by end-August, followed by other provinces from September in phases,” the analysts stated in a Monday note.
“We think it is not impossible to see travel visas for most major provinces to resume by the time of the October Golden Week.”
JP Morgan is estimating a gradual improvement in GGR numbers over the coming months, from a 94.5% year-on-year decline in July to 85% in August, 70% in September and around 50% in October.
“This 50% mark is important as all six operators can print positive EBITDA, with break-even points hovering at 35% to 45% of 2019 levels,” JP Morgan said.
Credit Suisse analysts offered a similar sentiment around a late August resumption of IVS for all of Guangdong Province, which they suggest could see GGR return to MOP$350 million per day by the end of September – representing around 44% of the MOP$801 million in daily GGR generated in 2019
“If the IVS is further relaxed for the whole of China in September, we believe gaming revenue could be about MOP$450 million a day into October,” said Kenneth Fong, Lok Kan Chan and Rebecca Law.
However, “the recovery is unlikely to be smooth – we expect GGR to be back to pre-COVID level by 3Q21.
“The recovery pace could be dragged by weak junket system and sentiment amid China’s recent campaign on anti-overseas gambling activities, operational constraints post reopening on social distancing requirements and the ability for players to move money smoothly across the border.”
Brokerage Bernstein described the resumption of IVS for Zhuhai as a “baby step” in the right direction.
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