GGRAsia – MS dips Macau 2022 GGR as ‘no exit in sight’ on travel

MS dips Macau 2022 GGR as ‘no exit in sight’ on travel


Macau Casino’s 2022 gross gaming revenue (GGR) forecast has been cut by around 30% by banking group Morgan Stanley, due to what it called a “long dry highway with no way out in sight”. in terms of market recovery. He also noted that the value of equity has shrunk by about half in recent quarters.

The institution now expects this year’s market GGR to be the equivalent of $11 billion, not only 30% lower than its previous estimate, but also equivalent to around 30% of the 2019 level. Mass and slot revenue in the latest forecast for 2022 has been revised down by 26%.

Morgan Stanley also lowered its GGR estimate for 2023, in this case by 11%, or 62% of the casino’s 2019 GGR. Its mass revenue and slots estimates in this are down 10% from compared to the institution’s previous forecasts.

‘Without a significant increase’ in Macau’s visitor volume, including mainland China and Hong Kong authorities ‘easing travel policies’ from Covid-19 restrictions – and improving mass revenue – companies from Macau casino “will remain negative free cash flow, resulting in higher net debt and lower book value,” wrote Morgan Stanley analysts Praveen Choudhary, Gareth Leung and Thomas Allen.

They added, “The industry reports about $800 million in losses and about $250 million in cash leaks per quarter. Net debt fell from $5 billion at the end of 2019 to $20 billion at the end of 2021, and shareholders’ equity fell from $23 billion to $12 billion.

Analysts added that it was “no wonder” that “a lot” of industry bonds are trading at a coupon of “more than 10%”.

The Morgan Stanley observed of the Macau market in general: “We recovered from the Covid shock in the first quarter of 2020, with quarantine-free travel between China and Macau.” But “we are stuck at about 30%” of pre-pandemic visitor volume “for the last six quarters,” the analysts added.

The institution further said its estimate of earnings before interest, tax, depreciation and amortization (EBITDA) in Macau’s casino industry was down 63% from its previous forecast, at $1.40 billion. dollars.

For the first quarter of this year, Morgan Stanley forecast the Macau industry to post modest 8% quarter-over-quarter growth in EBITDA, “despite stagnant mass revenue quarter-over-quarter. ‘other”.

The final quarter of 2021 was “negatively impacted by approximately $40 million from the hold rate and one-time charges related to the junket shutdown,” Morgan Stanley analysts said.