Investment bank JP Morgan expects Macau’s gaming industry to return to 95 per cent of pre-pandemic levels in two years’ time, thanks to “pend-up demand” from an expanding mass market expected to benefit from the ceiling on gaming tables unveiled in August.
DS Kim, an analyst with JP Morgan, wrote in a recent note that investors should remain confident about the short-term future of the city’s gaming sector, which he said could usher in a market recovery as early as the first few months of next year.
He pointed to two reasons behind his positive outlook: a policy under which the government has the power to lower the tax rate by up to 5 per cent points for gaming concessionaries which manage to lure more foreign tourists, as well as a gaming table cap market-wide slated to take effect next January.
Starting from next month, the number of gaming tables will be capped at 6,000, with each of them subjected to a minimum of MOP7 million (US$880,000) in gross revenue each year.
However, Kim believes that there is still room for growth as there is “more than enough excess capacity in the market”.
“We estimate there were only about 4,000 mass tables directly operated by casinos (excluding junkets and satellites) in 2019 (peak for mass GGR), so the table cap of 6,000 presents significant headroom … theoretically, up to 50% additional capacity for mass,” he said in the note.
According to the investment bank, the first quarter of 2023 would see a gradual return to EBITDA profitability in the gaming sector as mass market demand will have rebounded to about 35 per cent of pre-Covid levels, before reaching a 50-per cent mark in the ensuing two quarters.
However, a full return to normal mass demand will not come until 2024, the analyst pointed out.
