Investors see 2H Macau gain, rebound 2022: Bernstein


Investors see 2H Macau gain, rebound 2022: Bernstein

Investors in Macau casino stocks are looking beyond the current phase of market comeback, preferring to be focused on a possible “recovery in second half 2021 and rebound in 2022 with respect to potential normal operating environment and stock price performance,” says a Tuesday memo from Sanford C. Bernstein Ltd.

Junket VIP play could “continue to face significant headwinds in 2021 and into 2022,” wrote analysts Vitaly Umanksy, Tianjiao Yu and Kelsey Zhu.

“VIP is likely to continue to be negatively impacted by scrutiny around money transfers and customer and agent concerns about dealing with junkets. However, this may have some positive impact on premium direct and premium mass as some customers shift game play,” wrote the brokerage’s analysts.

The institution said Macau continued to face “headwinds” also, in relation to tourists coming from mainland China – the only place currently to have mostly a quarantine-free travel bubble with the gambling hub.

The analysts cited as examples of the hurdles, “continued complexity” around issuance of Individual Visit Scheme exit visas for mainland residents to come to Macau, the need for visitors to show proof on arrival of a valid test for freedom from Covid-19 infection, and “continued suspension” by the mainland authorities of group-tour visas for Macau trips.

Recent advisory notices issued by a number of local authorities in mainland China, calling on residents not to travel during the February Chinese New Year break as a precaution against spreading Covid-19, further clouds the prospects for Macau gaming during the week-long holiday, industry commentators have told GGRAsia.

Sanford Bernstein observed in its Tuesday update: “Many Macau customers are delaying trips to Macau even as premium consumption spend and travel in China has rebounded”.

The institution noted that the Macau government had previously said it could not consider having a quarantine-free travel bubble with Hong Kong – provider normally of about 10 percent to 15 percent of Macau’s annual casino GGR – unless that neighbouring special administrative region had 14 days without a Covid-19 infection case.

“We would not expect any opening in a Hong Kong [quarantine-free] travel bubble until late in the first quarter, or the second quarter” this year, said Sanford Bernstein.

Its analysts added that in their view “the travel-related constraints on Macau will not be eliminated until second-half 2021,” but there should be “strong” improvement in gross gaming revenue (GGR) and visitor volume, once travel options were “back to normal”.

The brokerage forecasts Macau market GGR for 2021 to grow to approximately two-thirds of 2019’s MOP292.46-billion (US$36.6-billion) level. That would be a 225 percent year-on-year improvement on 2020, it adds.

It thinks the mass-gambling segment in 2021 might reach about 75 percent of 2019 levels, with VIP reaching “only approximately 50 percent” of the 2019 tally.

“The industry is already achieving better than breakeven EBITDA [earnings before interest, taxation, depreciation and amortisation] at current revenue levels and with stronger recovery projected in mass (and non-gaming), EBITDA profitability growth should rise more so,” added the institution.

Separately in a Monday note, Sanford Bernstein estimated that Macau GGR for the period January 11 to 17 inclusive, had been “soft, with no near term improvement evident”. The brokerage said its own “channel checks” indicated that GGR in the first 17 days of January was about MOP4.7 billion, with a month-to-date average daily rate of circa MOP276 million. That is down 61 percent from a year earlier, but up 10 percent compared to December 2020.

Sanford Bernstein currently forecasts January GGR will be in the “low- to mid-60s of percent” relative to January 2020, which was the last strong trading month of that year in Macau casinos before the effects of the pandemic kicked in.


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