GGR down 68% y-o-y as casinos burn millions in cash daily
Macau’s gaming industry is still suffering from a slump in revenues, registering a 68% year-on-year drop in its May income as casinos burn millions of dollars of cash each day.
Data from the Gaming Inspection and Coordination Bureau (DICJ) shows that Macau’s gross gaming revenue (GGR) dropped to MOP3.34 billion, the second worse figure since September 2020, the month when travel resumed for visitors from mainland China.
May’s GGR is 25% better than April’s, but was down 87% pre-pandemic figures in 2019.
The figure is also worse than the median analyst estimate of a 64% year-on-year decline and follows a 68% slump in April.
Estimates from Morgan Stanley and Goldman Sachs Group Inc shows that the industry, under turmoil, was burning an average of USD12 million a day during the first quarter of this year.
Brokerage firm Sanford C. Bernstein recently noted that SJM Holdings Ltd is suffering from a continual cash bleed, warning that the gaming operator is in critical need of boosting its financial liquidity, in view of the losses the company is suffering.
The consultancy warned that continued delays in the refinancing of SJM’s bank debts are raising concerns, recalling that management has indicated a standby loan facility of up to HKD5 billion from Sociedade de Turismo e Diversões de Macau, S.A. (STDM).
According to analysts at Bernstein, in a worst-case scenario where revenue of each gaming operator drops down to zero, only SJM Holdings Ltd can survive between one to two-and-a-half years.
The Macau government, meanwhile, has been gracious to the sector as it looks to lower the GGR taxes by up to 5% if casinos are able to bring in players from outside China.
But with the current closure of borders to foreign arrivals that have been in place since March 2020, such a goal has a long way to go.
The SAR government taxes casinos in Macau at 39% of their gaming revenue — which includes a direct tax of 35% and other types of taxes for social and welfare purposes.
Meanwhile, last month, China’s National Immigration Administration has reconfirmed a strict Covid-19 border policy and restrictions on non-essential travel, a move that may further hinder arrivals, particularly of bettors, into the SAR.
The administration also indicated in a report that since 2021, it had barred over 90,000 people who were allegedly “engaged in gambling activities” from leaving the country.
Its government has also limited unnecessary outbound travel and tightened approval of entry and exit documents to deter the spread of Covid-19.
In April, visitor arrivals rose by 15.2% month-on-month to 606,841 in April, yet the figure still represents a year-on-year drop of 23.7%, following a 30% decline in March.
