Analysis | Gaming: Even conservative casino prediction puts 80% revenue recovery in sights

Macau’s gaming concessionaires may see a “sequential recovery” in gross gaming revenue throughout 2021, according to Union Gaming, a boutique investment bank and advisory firm focused on the global gaming industry.
Union Gaming, which has taken a more conservative view than some other analysts, suggests that such a recovery would manifest in the city returning to about 80% of the gross gaming revenue level of 2019 by next year.
That would mark a considerable turnaround for an economy widely expected to shrink as much as one-third over the next few months.
Nevertheless, the group remains “cautious” about the 80% recovery given that, at present, borders are still closed and strict travel restrictions are still in place.
“We forecast a sequential recovery throughout 2021 with operators largely getting back to approximately 80 percent of 2019 GGR [gross gaming revenue] benchmarks by year-end,” analysts John DeCree and Sam Ghafir said, according to a note seen by GGRAsia. “Our overall market estimate may seem overly conservative, but at this point there is just no visibility and we find it prudent to be more cautious.”
The cautious view articulated by Union Gaming is similar to that of brokerage Nomura, which said earlier this month that it could be 2022 before gross gaming revenue returns to 2019 levels.
Meanwhile, JP Morgan Securities (Asia Pacific) – and other analysts – see it “reasonable to expect 2021 earnings before interest, taxation, depreciation and amortisation to be similar to that of 2019.”
Where analysts agree, however, is that 2020 is likely in store for further declines.
Following a first quarter decline of 60% in gross gaming revenue, Union Gaming predicts that Macau gaming revenue will decline “approximately 75 percent in second-quarter 2020 across the board, by about 45 percent in third-quarter 2020 and 25 percent in fourth-quarter 2020.”
The group added that April’s gross gaming revenue, due to be released in a matter of days, may be “more pronounced” than the 80% year-on-year decline seen in March.
The SAR continues to endure near-zero levels in tourist arrivals as visitors from its number one source market are mostly prevented from traveling to the region due to the Central Government’s suspension of the individual visit scheme and Guangdong’s requirement that all arrivals, even its own residents, undergo a 14-day quarantine period.
According to data provided by the Public Security Police Force, which oversees immigration matters in the SAR, the number of tourist arrivals in March climbed above 200,000. That marked an improvement over the 156,000 visitor arrivals seen a month earlier, but remains far subdued from the more than 3 million tourists per month averaged last year.
Last week, credit ratings agency Fitch Ratings predicted that Macau’s gambling-
driven economy would contract by 24% this year, based on a “roughly 40 percent” fall in gross gaming revenue. Fitch added that a recovery in 2021 would amount to just 12.6% growth.
This view was considerably more pessimistic than a prediction made a week earlier in the International Monetary Fund’s World Economic Outlook report, which put full-year gross domestic product growth at -30% for 2020 and +32% for 2021. This suggests that the IMF believes the economic fundamentals of Macau remain strong and that the city will quickly recover once the coronavirus outbreak is fully contained.
Macau entered technical recession last year after recording two consecutive quarters of negative growth. The local economy contracted by 4.7% in real terms in 2019, according to the assessment made in the World Economic Outlook report.