Macau’s gaming sector’s recovery remains far-off despite the recent easing of travel restrictions with mainland China.
Visitor numbers to Macau are beginning to recover but they remain low, with the potential for a viral variant to cause a reinstatement of travel restrictions and regulatory uncertainty key risks that could lead to a negative rating, Fitch Ratings says.
The agency expects that the gross gaming revenue (GGR) recovery curve for 2022-2024 revenues will be 27%, 50% and 70% of 2019 levels, respectively.
“Relaxing strict coronavirus policies could result in a materially faster rebound in visitation and revenues, but the timing of such policy changes is uncertain. Any major easing in the zero-Covid approach in the near term is unlikely,” the group said.
China is steadfast in its zero-Covid policy, which results in lockdowns of districts and mass testing, both of which affect visitors to the SAR.
Following the announcement that the return of group tours from mainland China can be expected as soon as late October, along with the reinstatement of digital travel endorsement applications, gaming shares soared to their highest level in six months, up 15.65%, as recorded by Sands China.
However, Fitch forecasts the gaming recovery could be delayed with the reinstatement of tighter restrictions with higher infection rates.
“Slower China economic growth could also negatively affect the gaming recovery, including for the valuable premium mass and higher-end players,” the group said.
It said capital access for the operators’ Hong Kong-listed subsidiaries, which are the primary debt issuers associated with Macau operations, is likely to remain limited until “GGR recovers to levels closer to 2019 and the regulatory overhang from the gaming concessions subsides. Refinancing needs are modest until 2024 when some subsidiaries will start facing debt maturities, [and] when concession renewal event risk will no longer be a concern,” it added.
Currently, the public tender gaming concession is reviewing the proposals of seven companies vying for six concessions, which Fitch said “poses material event risk.”
“The possibility of onerous capital commitments also remains a key unknown until the concession tender process is publicly outlined by the government, which could occur in the near term,” it said.
