Macau VIP comeback maybe only 2023: Sanford Bernstein


Macau VIP comeback maybe only 2023: Sanford Bernstein

A brokerage says it is “now not assuming” VIP gross gaming revenue (GGR) in Macau will “recover before 2023,” until there is “more visibility around junket liquidity and demand”.

“VIP in 2021 – and to a lesser extent some premium mass – could be negatively impacted by continued tighter capital controls and customer and agent concerns about dealing with junkets,” said a Friday report from Sanford C. Bernstein Ltd.

Macau’s VIP baccarat GGR in the third quarter this year was MOP2.34 billion (US$293.0 million) of Macau’s nearly MOP4.89-billion casino GGR for the period. That was decline of 92.5 percent in year-on-year terms, associated with disruption caused by the Covid-19 pandemic. Nonetheless, VIP baccarat GGR had a market share of 47.9 percent for the third quarter of 2020.

Mass-market baccarat generated nearly MOP1.88 billion in the three months to September 30, a market share of 38.40 percent.

“Near-term, we forecast GGR in 2020 to decline 78 percent (-64 percent in fourth-quarter 2020),” stated the brokerage.

“Five of the six operators have already achieved EBITDA break-even in October/November, and by the end of the year, we expect all six, including SJM [Holdings Ltd], to do so,” added the institution, referring to earnings before interest, taxation, depreciation and amortisation.

“Longer term, we expect Macau GGR to grow at a 2 percent compound annual growth rate (CAGR)” judged over the period 2019 to 2023, “driven by 6 percent CAGR in mass (in particular, premium mass) while negatively impacted by -4 percent CAGR in VIP,” wrote analysts Vitaly Umansky, Tianjiao Yu, Kelsey Zhu and Xiaonan Zhang.

The institution observed: “Current investor sentiment on Macau is best described as uncertain, with long-term investors looking at the structural story beyond 2020 and shorter-term investors focused on the travel and near-term revenue recovery catalysts positioning for a momentum-driven stock price upswing.”

While research indicates that not all tourists to Macau are gamblers, analysts covering Macau gaming stocks typically find a broad correlation between visitor volume and casino market performance.

As of mid-November this year, Macau’s average daily tourist visitor arrival tally via all forms of available transport surpassed 20,600, compared to a daily average of 19,000 in October. That was according to Maria Helena Senna de Fernandes, director of Macao Government Tourism Bureau, who mentioned the figure at a Wednesday meeting of the city’s Tourism Development Committee.

Sanford Bernstein echoed a theme in recent commentary by management from Macau operator Melco Resorts and Entertainment Ltd, on the latter’s third-quarter earnings call, which had mentioned that visas for mainland China residents to come to Macau were being issued more quickly by some Chinese provinces than they were in Macau’s neighbouring province, Guangdong.

“Interestingly, in the early stage of recovery, non-Guangdong visitors returned faster than Guangdong’s due to stringent visa restrictions of the latter,” wrote the Sanford Bernstein analysts.


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