Macau to Benefit in 2022 as Mass Market Revenue Is Onshored, Says Morgan Stanley

Other Asia-Pacific gaming markets are likely to cede market share to Macau next year, as Chinese gamblers and tourists head back to the special administrative region (SAR).

Analysts at Morgan Stanley believe that business will return as regional travel restrictions ease. Mass market slots and table game players that in years past would have visited other gaming markets in the region will instead head to Macau.

According to our estimate, 20 percent of all Asia (ex-Macau) mass revenue could come back to Macau by 2022,” said the analyst team.

Based on estimates that Asia-Pacific markets excluding Macau generated $10.3 billion in gross gaming revenue from slots and mass market gamblers in 2019 — prior to the coronavirus pandemic — Morgan Stanley forecasts $2.06 billion of GGR being onshored back to the SAR by 2022.

The Morgan Stanley note doesn’t mention specific operators that can benefit from the reshoring of revenue at the expense of competing Asia-Pacific markets. However, of the SAR’s six concessionaires, Galaxy Entertainment and Las Vegas Sands (NYSE:LVS) control dominant share among mass market players.

Return to Macau Could Boost Operator Prospects

Owing in part to its proximity to mainland China and Hong Kong, Macau is the world’s largest casino center, and has been for some time.

As distribution of coronavirus vaccines increases throughout the world, quarantines of foreign nationals visiting other Asia-Pacific countries will become a thing of the past. However, that doesn’t mean Chinese travelers will rush to return to other gaming areas. That’s to Macau’s benefit.

“With higher travel restrictions, we expect part of this business to come back to Macau,” said the Morgan Stanley analysts.

Earnings Outlook

Adding to the good news for Macau operators is that cost efficiencies realized during the pandemic are likely to matriculate to bottom lines. Morgan Stanley estimates that a roughly four percent cut in costs could boost gaming companies’ Macau earnings before interest, taxes, depreciation and amortization (EBITDA) by 15 percent in 2022.

The resumption of normal mass market is pivotal for Macau concessionaires, because Morgan Stanley estimates that in 2019, that segment drove almost $22 billion of GGR. That’s more than seven times the rate seen in Singapore, the next largest Asia-Pacific market for mass players.

The next catalyst for Macau is likely the resumption of e-visa applications for the Individual Visit Scheme (IVS). That’s the visa most citizens of mainland China use to visit the SAR. Without electronic applications, would-be tourists must apply in person and are subject to multi-week wait times — factors that are hindering the gaming center’s recovery.