EPA/Aleksandar Plavevski

Gaming sector rebound only in 2020 2H – Analysts

The most optimistic predictions by analysts from Morgan Stanley and Sanford C. Bernstein estimate that the local gaming sector will likely only see a strong rebound in the second half of this year, following poor results from the impact of the Covid-19 outbreak.

Some 29 casinos resumed operations today after a 15-day suspension enforced by local authorities as a way to contain the spread of the new virus, with 12 properties remaining closed.

Local gross gaming revenues having already dropped by 11.3 per cent year-on-year in January to MOP22.12 billion even before the suspension, with previous estimates setting a possible 95 per cent year-on-year drop in results for February.

“Macau stocks have remained resilient despite casinos being closed for the last two weeks. We expect 1Q20 GGR to decline by 45 per cent YOY and improve to -26 per cent YOY in 2Q20 and normalize by 3Q20 (+3 per cent YOY),” Morgan Stanley indicated in a note tody.

The brokerage also revised gross gaming revenue growth estimates from a previous 2 per cent year-on-year drop in 2020 to 16 per cent, and with growth in 2021 to then bounce back to a 20 per cent rise, instead of 10 per cent.

Meanwhile, Bernstein considered a ‘bull’ case scenario in which COVID-19 fades quickly with a strong rebound in the second half of this year.

“In this case, we forecast 2020E GGR to fall by over 11 per cent and Macau gaming companies would see EBITDA fall 12 per cent-26 per cent (with the US parents faring better),” the brokerage added.

In the worst-case scenario severe disruption would remain and GGR weakness would last into the autumn months with only slow and gradual pick up in visitation.

“In this case, we expect 2020E GGR to fall by ~43 per cent and Macau gaming companies to see EBITDA fall 57 per cent-86 per cent,” the company added.