MS lowers Macau estimates, as Covid cases hinder e-visas

November 22, 2022 Macau Earnings & Filings Industry Updates

Brokerage Morgan Stanley Asia Ltd has reduced by 15 percent and 3 percent respectively, its forecast for Macau market casino gross gaming revenue (GGR) for this year, and for 2023. The institution now expects 2022 full-year GGR of about US$5.6 billion, 15 percent of 2019 levels, i.e., before the onset of the Covid-19 pandemic.

In 2023, Macau GGR should reach US$16 billion, about 43 percent of 2019 levels. “We are in line with the Macau government’s 2023 GGR estimate,” wrote analysts Praveen Choudhary and Gareth Leung in a Monday memo.

The analysts observed that their estimates were respectively 10 percent and 15 percent below market consensus.

The Macau government estimates the city’s casino GGR next year will be MOP130 billion (US$16.08 billion), according to its 2023 fiscal year budget proposal published earlier this month.

The Morgan Stanley team noted that the rising number of Covid-19 cases in mainland China was “not helping the otherwise important resumption of e-visas [to Macau] since November 1”.

The mainland’s Covid-19 caseload hit last week a six-month high, as big cities, including Guangzhou in Macau’s neighbouring Guangdong province, recorded flare-ups in the number of infections.

“Resumption of e-visas to Macau has started since November 1. Yet, we expect near-term recovery to remain gradual/choppy due to the Covid spikes in Guangdong and elsewhere in China,” stated the Morgan Stanley analysts. “We expect more travel normalisation to occur in 2023,” they added.

The brokerage also revised down – by 7 percent and 38 percent, respectively – its 2022 estimates for net revenue and earnings before interest, taxation, depreciation and amortisation (EBITDA) for the Macau companies.

Morgan Stanley now expects Macau’s six casino operators to record a combined EBITDA loss of nearly US$1.28 billion in 2022, compared to a positive figure of US$577 million in 2021. It estimates net revenue of US$7.06 billion in aggregate this year, down from US$11.45 billion in 2021.

The “2022 estimates for net losses for the Macau companies have widened by 7 percent as a result,” to about US$5.10 billion, added the institution.