Gaming | Morgan Stanley forecast cut reflects ‘tightened crackdown’
Investment banking firm Morgan Stanley is forecasting a total of MOP121.4 billion in gross gaming revenue for 2022, numbers that are 6.6% shy of the government’s forecast of MOP130 billion for this year.
The figure is 42% of pre-pandemic levels, yet also represents a 41% increase compared to its initial expectation of MOP85.9 billion this year.
Analysts of the firm said that the downward revision is to “reflect China’s tightened crackdown on illegal capital outflows, as well as potentially slower travel recovery amidst the Covid-zero policy and new Covid variant,” as cited in a report issued by GGRAsia.
“For 2023, the lower [forecast] GGR is due to lower VIP revenue at MOP16 billion or 14% of 2019 from 54% of 2019′s level,”analysts advanced.
Forecasting the total estimates of expected Annual Property EBITDA for all six gaming concessionaires, analysts expect USD6.7 billion this year, after a negative MOP9.6 billion amount last year. With property, they expect results to recover to USD31.2 billion.
Analysts raised three remaining crucial events for the industry: publication of the gaming law public consultation results; a new gaming law draft, and the law draft being passed at the Legislative Assembly.
“Each of these events will provide clarity, even if the Macau Chief Executive temporarily extends the licenses beyond June 2022, which we expect could be announced by in Q122,” the brokerage said.
Back in July, as global investors became edgy about the extended scope of mandates implemented by the central government on several industries, Morgan Stanley Asia assuaged concerns in a memo, confirming the impact of these restrictions on the gaming industry would be limited.
The group stated in a release that these tightened controls are “less relevant” to the casino industry.
Recently, Fitch Ratings issued a note stating its belief that the Macau gaming and tourism industries will begin recovering from more than two years of economic hardship at some point next year.
However, it warned investors that they should be cautious when it comes to buying shares in the casinos that operate in the city.
Fitch analysts Andrew Fennell and George Xu trust that, as vaccination rates improve, Macau will be more open to cross-border travel with the mainland, Hong Kong, and Taiwan.
The analysts also forecast that Individual Visit Scheme (IVS) would be fully restored around the midpoint of 2022.
Fitch Ratings this week unveiled rating watch negative (RWN) alarms for Las Vegas Sands, MGM Resorts, and SJM Resorts.
