Macau to recover slowly in 2020, analysts say

Nomura analysts expect the sector to show signs of improvement after taking a big knock due to the Coronavirus crisis.

Macau.- Brokerage Instinet, the research division of Nomura, has said it expects GGR to recover in Macau from June onwards after the industry took a big hit due to the Covid-19 outbreak.

In its latest report, Nomura said that GGR started to gain traction in March but then declined once again after additional border restrictions between Macau and Guangdong province were imposed.

There has been no update on when that measure and other restrictions, such as the mandatory quarantine for Guangdong residents that come back from Macau, will be lifted.

While Macau’s casino GGR in March saw an 80 per cent contraction year-on-year according to official data, April GGR estimation looks set to be even worse after a sharp decline in the number of daily visitors to the city.

While the immediate future looks bleak, Nomura estimates the market will show signs of recover from June onwards.

“There will likely be a recovery in 2020, but slow,” wrote analysts Harry Curtis, Daniel Adam and Brian Dobson.

They said normal traffic flow at Macau borders could resume in six to 12 months, but that the recent travelling restrictions implemented in mainland China indicated “Beijing is taking the risk of a second wave of infection seriously.”

“When the IVS system is restarted, it will be into a safe and controlled environment,” they added.

If normal levels return in June, second-quarter GGR could be down about 80 per cent in year-on-year terms.

“VIP and premium mass are probably the first to recover since there are likely to be restrictions on visitation growth which will limit mass,” the analysts continued.

They also forecast GGR to decline by 65 per cent and 60 per cent in the third and fourth quarters year-on-year respectively.

They also said the Macau market might eventually recover and reach US$22.6billion in GGR in 2021, roughly 62 per cent of the 2019 level, “if the reinfection rate [of Covid-19] is low.”

“To achieve this number, IVS needs to expand to larger, more distant provinces, mass and group visitors must have confidence in health screening protocols at the borders, and social distancing policies on casino floors should be relaxed, thus increasing the number of operational gaming positions during peak periods,” the Nomura said.