Fitch affirms casino operators can absorb closure impact

Credit rating agency Fitch Ratings has warned that the 15-day closure of Macau casinos is “going to have a meaningful, immediate impact to cash flows for the Macau casino operators,” but that the six concessionaires were well-positioned to absorb the impact of the closure.
Building on a report issued last month by the firm, Fitch added that although the coronavirus would leave a mark on the local economy, “casino operators are well-positioned to absorb this weakness thanks to their strong balance sheets, liquidity levers, and no near-term maturities.”
Statements attributed to Colin Mansfield, director of corporate finance, suggested that the impact to revenue and cash flow would be temporary. “Since we expect this to be a short-term cash flow hit, near-term liquidity is key for managing the disruption.”
A hypothetical stress case modeled by the firm showed that Macau gaming could face revenue declines of 50% and 25% in the first quarter and second quarter respectively. This would constitute an aggregate $3.3 billion (MOP26.4 billion) cash flow decline for all six Macau operators.
Gaming analysts earlier predicted that even a two-week suspension of gambling activity in the SAR could see gross gaming revenue collapse by as much as 50% during the first quarter.
Fitch affirmed that gross gaming revenue growth in Macau was very likely to be negative this year, but that “the degree of decline is difficult to ascertain until the full extent and duration of the coronavirus’ impact is clearer.”
Gross gaming revenue dropped 3.4% year-on-year to about 292 billion patacas in 2019, led by a sharp decline in the fourth quarter. DB