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Morgan Stanley cuts Macau 2021 GGR tally again, by 23 pct

The Morgan Stanley banking group has cut again – this time by 23 percent – its estimate for Macau market casino gross gaming revenue (GGR) generated this year.

TThe institution said the fresh downward revision was due to the “zero-tolerance policy” toward Covid-19 in place in both mainland China and Macau.

The timing regarding normalisation of travel between Hong Kong, Macau, and mainland China, “is still unknown”, Morgan Stanley said on Sunday, and “might only happen after” the 2022 Winter Olympics in Beijing, in February that year.

“We are concerned that the status quo,” namely visitor volume “at 25 percent of pre-Covid level, GGR at 35 percent,” and mass-market play at “50 percent” of pre-pandemic levels “could continue for longer,” wrote analysts Praveen Choudhary, Gareth Leung, and Thomas Allen.

That might be the case even though the note mentioned that Macau had an average daily tourist tally of 23,400 during the first two weeks of September, 37 percent of 2019 levels, and 90 percent higher than August this year, which coincided with an alert and tighter controls on inbound travel to Macau, after four locals tested positive for the Delta variant of Covid-19.

The banking group now thinks Macau’s 2021 GGR will be just under MOP96.77 billion (US$12 billion), which would still be up 60 percent year-on-year on the MOP60.44 billion achieved in 2020, when disruption to inbound tourism due to the Covid-19 pandemic was at a height.

Analysts are now typically comparing 2021 data with 2019, i.e., pre-pandemic levels.

On that basis, Morgan Stanley’s latest Macau GGR estimate for 2021 would be 33 percent of the GGR achieved in 2019, versus the institution’s previous expectation – released in May – that the 2021 figure would be 45 percent of 2019′s.

In May, the bank had already cut by 19 percent its estimate for Macau market casino GGR.

In its Sunday memo, Morgan Stanley also revised its estimate for 2021 Macau-market corporate earnings before interest, taxation, depreciation, and amortisation (EBITDA), stressing that, without normalisation of travel, casino operators would remain at EBITDA break-even.


For 2021, the institution expected, market-wide, corporate EBITDA to be US$1.18 billion, down 69 percent on its previous estimate for the year of nearly US$2.89 billion. In 2019, Macau corporate EBITDA was just under US$9.25 billion.

Morgan Stanley feared that an eventual recovery of revenue to pre-pandemic levels “could be months or years away”, due to the “lower efficacy for certain vaccinations” and the impact of the more infectious Delta variant of Covid-19.

Although the banking group’s analysts were “confident” about pent-up demand in China for Macau gambling, they now believe Macau’s GGR will not return to 2019 levels by 2023.

They did however forecast mass-market revenue to hit US$24 billion in 2023, 6 percent higher than pre-Covid-19 levels.

In addition, Morgan Stanley admitted that Macau government proposals for the gaming industry, announced last week and currently subject to public consultation, “made the market nervous”.

The government is proposing to step up scrutiny of casino concessionaires, including the “direct supervising” of these companies by appointing “delegates” to oversee how firms fulfil their concession duties.

In a press conference on September 14, the government also suggested a need for it to approve dividend distribution to shareholders by Macau’s casino operators.

Morgan Stanley nonetheless believed a positive of the proposals was the likelihood of a prompt resolution of the Macau licensing issue.

The city’s existing six gaming concessions are due to expire in June 2022, unless the authorities grant a form of limited extension as permitted under current Macau gaming law. Such extension can be in increments, up to a maximum of five years from the original 20-year term.

The banking group says “language in the document suggests” authorities are leaning towards maintaining the number of licences and the gaming tax rate.


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