2019-nCoV to impact gaming operators’ cash flow

The city turned into a ‘ghost town’ after the restrictions imposed on inbound tourists (Paulo Coutinho, MDT)

The local government’s protection measures against the 2019-nCoV outbreak will have a strong effect on Macau’s cash flow, a report by Fitch Ratings released today (Friday) says.

The cash flow effect is particularly strong concerning the city’s gaming operators. However, the gaming operators are still said to be able to resist this crisis due to their firm credit backgrounds.

According to the statistics released by Macau’s Public Security Force, Macau has recorded, on a daily basis, a decrease of over 80% in the number of visitor arrivals since January 24 (the last day before the beginning of the lunar new year).

Currently, in Macau, there are four US-listed gaming issuers: LVS, Wynn Resorts, MGM Resorts International and Melco Resorts & Entertainment.

The adequate liquidity of these four US issuers is said to be capable of making them withstand the historically high decrease in visitor arrivals, which in turns creates potential FCF effects.

Between January 24 and January 30, Macau recorded less than 150,000 visitor arrivals from mainland China, an accumulated decrease of 83.3%. On January 30 alone, a decrease of 92.6% was recorded, with only 9,664 mainland visitors arriving in Macau.

As of September 30 of 2019, around 64% of LVS’s, 72% of Wynn’s, 22% of MGM’s and 88% of Melco’s consolidated property-level revenues are from Macau.

According to Fitch Ratings, the four US-listed issuers will have a total of USD20 billion in cash flow by the end of the second quarter of 2020 under the assumption that their revenue from Macau will decrease 50% and 25%, respectively, in the first and second quarters of 2020.

Despite the fact that the pandemic will not influence these issuers’ cash flow in the long-term, in the short-term however the issuers will suffer from a temporary cash flow impact assuming that the outbreak of 2019-nCoV will last no more than two quarters.