Gaming | 2021 GGR forecast cut by Morgan Stanley due to ‘weaker VIP’ sector

International investment bank Morgan Stanley has lowered its projected tally for Macau’s gross gaming revenue (GGR) by around 10% to nearly USD23.7 billion, owing to the strong headwinds against the VIP gaming sector.
The financial institution’s adjusted GGR is around 65% of the full-year aggregate of MOP292.5 billion recorded in 2019.
Morgan Stanley’s latest adjustment to Macau’s gaming outlook came the same day Secretary for Economy and Finance Lei Wai Nong reaffirmed the government’s forecast that Macau would yield MOP130 billion in GGR in 2021, or around 44.5% of 2019 levels.
Weaker performance expected in the city’s VIP gaming sector will be the key dampener to the overall GGR, said Morgan Stanley.
The financial firm forecasts the receipts from the VIP sector in 2021 to reach only 40% of 2019 levels. They also does not expect the figures to rebound to 2019’s figures even in 2022, said the firm’s analysts.
Meanwhile, the mass market may perform better than the VIP sector, with its 2021 revenue expected to generate around 80% of 2019’s level.
Considering the gloomy outlook for the VIP segment, the city’s two leading junket brands, Suncity and Tak Chun, are now “taking stakes in casinos and diversifying away from pure junket business,” the analysts pointed out.
China’s new and more stringent gambling law, which criminalizes people who organize for Chinese citizens to take part in gambling activities, is also on the horizon. It will come into force on March 1 and is expected to create a huge blow to Macau’s VIP market.
The financial firm is also scaling down its forecast for corporate earnings before interest, taxation, depreciation and amortization (EBITDA) of Macau’s casino operators in 2021 from the previous $7.16 billion to $6.43 billion, representing a 10.3% drop.
The cost-saving strategies adopted by the city’s casino operators during Covid-19 are expected to boost the EBITDA margin higher, stated the analysts.
According to the report, the operating expenses for casino operators in Macau (excluding taxes, VIP rebates and one-off bonus reversal) dropped 39% year-on-year in the third quarter of 2020.
Hence, the institution has raised its 2022 forecast for corporate EBITDA by 4% to almost $9.97 billion. Honey Tsang

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