Gaming | JP Morgan winds up forecasting for 2022 rebound
Following uncertainties amid the Covid-19 crisis and the subsequent economic fallout and strict border measures implemented, brokerage JP Morgan has said that it will not attempt to forecast the city’s gaming recovery for 2022.
In a report, the brokerage reiterated that the degree of recovery of the gross gaming revenue (GGR) from casinos is dependent on the “pace and level of travel normalization around the region,” citing a report issued by GGRAsia.
The analysts admitted that they are less confident in their numbers than they were a year ago, noting that the investment bank had modelled mass and VIP GGR would recover to 75% and 35% of 2019’s in 2021, respectively. These estimates were “more conservative” than investor consensus at that time.
“The wild card will be any travel restrictions from China or a Covid-19 outbreak in Macau,” analyst Vitaly Umansky stated.
Back in June, JP Morgan analysts expressed their disappointment with “stricter-than-expected” border measures and the initially proposed cross-city travel plan between Hong Kong and Macau. They noted: “we couldn’t help but be somewhat disappointed by the seemingly limited scale (at least initially) of the travel bubble plan, as well as the slower-than-expected timing of the launch.”
They therefore scaled down its GGR prognosis for the third and fourth quarters of 2021 to 43% and 58% of pre-pandemic levels respectively, down from the earlier prediction of 50% and 66%.
In 2021, there was a 44% year-on-year increase of GGR compared with 2020, figures released by the Gaming Inspection and Coordination Bureau (DICJ) show.
The year closed with a total GGR of MOP86.86 billion, 43.7% higher than the MOP60.44 billion recorded in 2020.
Nonetheless, the positive result obtained at the close of 2021 remains far behind the pre-pandemic GGR of 2019 – less than a third of the MOP292.46 billion in GGR recorded that year.
December closed with a monthly GGR of MOP7.96 billion, attributable to reductions in VIP spending “on the back of the Suncity closure and other junkets’ business slowing down,” according to Sanford Bernstein.
Back in September, following the announcement of amendments to be made to the gaming law, JP Morgan noted that city’s gaming sector would stay “un-investable” until clarity was given regarding the forthcoming concessions,
In a note by analysts DS Kim, Amanda Cheng, and Livy Lyu, JP Morgan states that investors should remain cautious, as clarity on this matter is “unlikely [to come] in the next six months.”
