UBS Takes Axe to Macau 2020 Gaming Revenue Estimate, Forecasts 44 Percent Drop

UBS is revising lower its 2020 gross gaming revenue (GGR) forecast for Macau nearly four months after the coronavirus forced a 15-day shutdown of casinos there.

In a recent note to clients, UBS analyst Robin Farley projects a 44 percent decline in revenue this year for the world’s largest gaming center, down from a prior estimate calling for a 31 percent contraction.

We are lowering gross gaming revenue estimates on slower visitor recovery in Macau, as we expect a partial resumption of the Individual Visit Scheme from June/July in Guangdong, later than our May expectation earlier,” she said.

The individual visit scheme (IVS) is a vital travel permit used by citizens of mainland China to enter Macau, and many of them are considered premium mass players or high rollers. Beijing froze IVS issuance late last year in advance of President Xi Jinping’s visit to the peninsula. But experts believed the halt would be lifted early this year. The coronavirus pandemic subsequently altered those plans.

Still Struggling With Travel Bans

After dealing with a 93.2 percent decline in GGR last month, Macau concessionaires continue struggling with travel restrictions that are keeping visitors away from the gaming mecca.

“Guangdong, Macau, and Hong Kong have discussed allowing cross-border travels with mutually recognized health-monitoring measures, so the potential convenience of that would be a positive for Macau gaming, though timing is unclear,” said Farley.

Guangdong is the mainland province nearest to Macau. Experts believe if that province relaxes travel restrictions with the gaming hub, other mainland regions will rapidly follow suit.

Some Good News

There are some indicators that Macau gaming numbers will bounce back later this year. For example, VIP traffic is somewhat steady on the peninsula, and there’s belief that Chinese gamblers won’t venture far from home in the coming month.

Farley, the UBS analyst, says the combination of travel bans and no COVID-19 vaccine will keep Chinese gamblers away from other markets, such as Las Vegas and Singapore, which is to the benefit of Macau operators.

She also highlighted the strong cash positions of Macau concessionaires, noting most have ample cash on hand and access to more capital, if needed, to endure what’s now a trying operating environment. As just two examples of lenders’ willingness to work with Macau gaming companies, MGM China recently secured a $503 million credit revolver, while Sands China, the biggest Macau operator, said earlier this week it’s selling $1.5 billion worth of debt. Of that total, $800 million comes due in 2026, with the remainder maturing in 2030.