Macau casino CNY outlook brighter on travel easing: JPM

January 9, 2023 Macau Earnings & Filings

Brokerage JP Morgan Securities (Asia Pacific) Ltd says the Macau casino mass-market segment might perform better than it expected during the Chinese New Year (CNY) break, thanks to the dropping from Sunday (January 8) of most of Macau’s Covid-19-related testing and travel restrictions on inbound visitors from the Chinese mainland, Hong Kong, and Taiwan.

As recently as Monday, JP Morgan had predicted mass-market casino gross gaming revenue (GGR) for the upcoming holiday due from January 21 to 27, would be likely to recover to 30 percent to 40 percent of pre-Covid-19 levels, spurred by factors including discontinuation since the second half of December of China’s ‘zero-Covid’ policy.

But the pace of rule relaxation since Monday – plus announcements of a resumption or ramping up of supporting transport infrastructure including passenger ferries between Hong Kong and Macau – has led the institution to a reassessment.

“For the near-term numbers, we feel our current model… for both Lunar New Year… and first-quarter 2023 – is a bit too conservative,” stated analyst DS Kim, adding that a factor was likely to be “the earlier-than-expected return of Hong Kong gamblers” to the Macau market.

Up to now, analysts had ascribed the lack of Hong Kong tourists in the Macau market to travel, testing and quarantine rules that rendered impracticable the sort of short-term visits favoured by Hong Kongers in pre-pandemic times.

A number of analysts has said that visitors from Hong Kong accounted for 15-percent plus of Macau’s annual GGR in pre-pandemic trading.

In terms of travel easing for mainlanders and people in Hong Kong, JP Morgan’s analyst said “we wouldn’t be surprised if full recovery – i.e., mass [GGR and] non-gaming [revenue] going back to 2019 levels – happens some time in the second half 2023, much earlier than our current model of mid-2024”.

Mr Kim added: “We feel very comfortable to project the industry to print positive EBITDA [earnings before interest, taxation, depreciation and amortisation] from the first quarter.”

That would in likelihood mean mass GGR at “around 35 percent recovery” relative to pre-pandemic levels, and “positive free cash flow from the second quarter, i.e., mass GGR at around 50 percent recovery,” asserted the analyst.

It was announced on Thursday that Macau is to cancel with effect from Sunday most of its travel restrictions related to the Covid-19 pandemic, dropping all testing requirements for inbound travellers from mainland China, Hong Kong and Taiwan.

On the same day, the authorities on the Chinese mainland announced that travel restrictions with Hong Kong and Macau would be substantially eased from Sunday, with most Covid-19 controls due to be scrapped.

People arriving in Macau from overseas destinations however will still have to present a ‘negative’ result of a nucleic acid test or a rapid antigen test from a sample obtained 48 hours before departure.