Sanford Bernstein Forecasts Macau Recovery In Late 2021, Rebound in 2022

Article by : Helen Jan 28, 2021

Macau took a strong hit from the still-ongoing COVID-19 pandemic. Although things have started getting well at a good pace, Macau casino operators, gambling analysts, and investors in casino stocks are now looking beyond the current situation and talking of a possible rebound in 2022. The latest indicators show that the full recovery may happen in the second half of 2021, while the Macau gambling industry will get back to normal life in the first half of 2022.

VIP junkets may face roadblocks in 2021 due to new money transfer rules and the upcoming changes in domestic policy. Most analysts expect that junket VIP play will drag the total gross gambling revenue (GGR) down. “VIP is likely to continue to be negatively impacted by scrutiny around money transfers and customer and agent concerns about dealing with junkets in Macau. However, this may have some positive impact on premium direct and premium mass as some customers shift gameplay,” said analysts Vitaly Umansky, Tianjiao Yu, and Kelsey Zhu.

The analysts also pointed out that Macau tourism also continues facing some “headwinds” caused by the complexity of issuing the Individual Visit Scheme visas to the residents of mainland China who want to visit Macau, the need for tourists to have negative COVID-19 test results, and the suspension of group-tour visas. Most of these restrictions and regulations come from the authorities in mainland China while Macau remains one of few quarantine-free places with the gambling hub.

A number of mainland authorities have recently issued advisory notes calling on local residents to resist traveling during the Chinese New Year holidays to not let the coronavirus spread burst out again. While this might be a decent precautionary measure, it also clouds the Macau gambling market opportunities during the week-long holiday.

The analysts from Sanford C. Bernstein Ltd. pointed out that Macau authorities had previously claimed they would not consider opening a quarantine-free travel bubble with Hong-Kong unless the latter had recorded zero COVID-19 during 14 days. Even though Hong-Kong is considered a massive contributor to Macau’s annual casino gross gambling revenue, the quarantine-free travel bubble is not expected to open until the second quarter of 2021. The analysts also added that they would still expect a strong improvement in GGR as soon as the travel restrictions would be eliminated.

According to the latest institution’s forecasts, in 2021, Macau GGR will be equal to around $US24 billion, which is two-thirds of what Macau saw in 2019. At the same time, that would be a 220% improvement from what was recorded in 2020. The brokerage thinks that the mass gambling segment will be 75% of 2019 results, but the VIP play will reach only 50% in the best-case scenario, dragging the total GGR down.

The industry is already achieving better than breakeven EBITDA at current revenue levels and with stronger recovery projected in mass (and non-gaming), EBITDA profitability growth should rise more so.

Sanford C. Bernstein Ltd

In its Monday update, the institution mentioned Macau GGR had been flat, with no hints of improvement during the first weeks of January 2021. The brokerage’s figures indicated that in the first 17 days of January 2021, GGR was 60% down compared to the same period the previous year, but that was also a 10% increase from the results recorded in December 2020. Sanford C. Bernstein expects January GGR to remain around 60% of January 2020 levels, which turned out to be the most productive month of the year before the pandemic kicked in.

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