Macau casinos may not start pledged investments until 2024, analysts say

2023 is expected to be a year of recovery for the SAR’s gaming and tourism sectors.

Macau.- Morgan Stanley has reported that Macau casino operators’ pledged investments are likely to begin in 2024 because 2023 will still be a year of recovery for the SAR’s gaming and tourism sectors.

The six gaming operators will be required to increase non-gaming investment by around 20 per cent of their initial pledge if Macau’s annual gross gaming revenue reaches MOP180bn (US$22.45bn) by 2027. Morgan Stanley believes the figure is achievable, as 2019 mass revenue reached US$22bn and China discretionary retail values are up 20 per cent from 2019 levels.

With e-visas returning, China gradually removing its Zero-Covid policy and the HK-Macau-Mainland border expected to reopen in the second half of 2023, Morgan Stanley is confident that post-Covid earnings will outperform pre-Covid earnings.

See also: Macau’s economy could rebound 46% in 2023, according to Fitch Ratings

Analysts stated: “Clarity is lacking on how operators are going to spend the required investment on non-gaming. Yet, many investment examples provided by Macau under the 11 non-gaming areas are opex in nature, which tends to have very low returns.”

The brokerage said: “We expect 2024e GGR and Mass revenue at 70 per cent and 105 per cent of 2019 levels, respectively, which we think is conservative as positive drivers should outweigh the negative ones.”

Macau to reach 95% of pre-pandemic levels in 2024 – JP Morgan

DS Kim, an analyst with JP Morgan, has predicted that Macau’s gaming industry could reach 95 per cent of pre-pandemic levels in two years’ time. Kim says the recovery will be driven by pent-up demand from an expanding mass market.

DS Kim cited two reasons for the optimistic outlook: Macau’s policy allowing the government to lower taxes by up to 5 percentage points for operators that attract more foreign tourists and an increase in the market-wide cap on gaming tables to 6,000 from January (around 4,000 tables were directly operated by casinos in 2019).

Macau’s GGR for the first eleven months of 2022 combined stands at MOP38.7bn, down 50.9 per cent year-on-year.