Macau Facing Ides of March, JPMorgan Forecasts GGR Slide up to 80 Percent This Month

Macau’s road back to gross gaming revenue (GGR) normalcy in the wake of the coronavirus pandemic won’t be realized this month. Some analysts expect GGR there is tracking as much as 80 percent off year-earlier levels.

Through the first half of March, concessionaires in the world’s largest gaming center likely generated a combined $356.2 million in turnover, down 75 percent to 80 percent on a year-over-year basis, according to JPMorgan Securities.

While this is slightly better than the circa MOP170 million/day ($21.25 million) in the previous week, we think week-on-week trend is almost meaningless at this point, as it is will continue to be extremely volatile, driven by a small group of players,” said the research firm in a Monday note to clients.

JPMorgan’s estimate jibes with one released earlier this month by brokerage house Bernstein, which said Macau’s GGR likely slid almost 80 percent year-over-year through the first eight days of March. Those dour forecasts come after gaming turnover in the Special Administrative Region (SAR) plunged by a record 88 percent in February following a 15-day gaming property closure because of the COVID-19 outbreak.

Waiting For Green Shoots

As gaming hubs around the world grapple with the coronavirus, investors and operators are desperate for positive vibes, and Macau may be inching to closer compared to other regions due in part some strength among high-end players.

“VIP seems to be faring better (down 70 percent to 75 percent year-on-year) than mass (down 80 percent to 85 percent), which is also within expectations and not very telling,” according to JPMorgan.

If Beijing gives the go-ahead for travelers from Guangdong, the closest province to Macau and China’s wealthiest, to return to the SAR, that could be a significant near-term boon for gaming revenue there.

Positive Signs

Earlier this month, China’s State Council approved the extension of Macau’s jurisdiction to Hengqin Port, a move that could aid in increasing visits from Guangdong. That extension goes into effect midnight Wednesday. But the Guangdong and Macau governments must make a decision on when the new checkpoint will officially open.

As for forecasts on Macau-related equities, essentially none of which have been positive this year, JPMorgan sees some utility in bad news being largely baked into these names.

“While we embrace near-term concerns on horrid GGR trends and sell-side earnings cuts, we believe most of the cuts will be done by next month (post-March GGR, plus possible resumption of Macau IVS), after which we expect these stocks to grind higher on ‘less bad’ trends and normalizing multiples,” said analysts at the bank.