Macau's Gaming Slump Why Casinos Are Burning

  Gross gaming revenue dropped to 3.34 billion palaces ($413 million), according to the Gaming Inspection and Coordination Bureau. The results were worse than the median analyst estimate of a 64% year-on-year decline and follow a 68% slump in April and a 56% drop in March. 

• Revenue rose 25% from the previous month, but was down about 87% from pre-pandemic levels in 2019.

Key Insights

•   The gaming industry has been mired in uncertainty due to the strict COVID-19 curbs in mainland China, Macau’s biggest source of visitors. In May, officials strictly limited unnecessary out bounds.
•   Travel for its citizens and tightened the approval of entry and exit documents to prevent the virus from being brought into the country. Then there’s a separate China-led crackdown on cross-border gambling, which has led to a further tightening of visa issuance for those suspected of illegal gambling activities.
•   Visitation plunged 24% year-on-year in April after a 30% decline in March. Macau is set to release figures for May later this month.
•   With gaming revenue plummeting, the city’s six major casino operators are facing increasing liquidity pressure. The industry was burning an average of $12 million a day in the first quarter, according to estimates from Morgan Stanley and Goldman Sachs Group Inc.
•   In a worst-case scenario of no revenue coming in at all, every operator except SJM Holdings Ltd. could survive between one and two-and-a-half years, according to an estimate from Sanford C. Bernstein. SJM may only survive three months, but the company is in the process of negotiating a potential refinancing that could provide it with HK$5.7 billion ($726 million) in further liquidity, Bernstein said.
•   Macau is showing some signs of willingness to support the industry in difficult times. It’s mulling revisions to the gaming bill that’s currently being scrutinized by the city’s legislature, including a potential tax cut of as much as 5% on casinos’ gaming revenue if they can bring in players from outside of China.
•   The enclave has also eased some travel curbs for visitors from Portugal who are not Macau residents, allowing them to enter the city if they serve a period of hotel quarantine. Macau was previously shut to all overseas travelers.

  Market Performance

• •   The Bloomberg Intelligence index of Macau’s six casino operators fell 8.6% in May, compared with a 1.5% rise in the benchmark Hang Seng Index.

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• •   May 27, Macau’s First Quarter GDP Fell 8.9% Y/y; -13.2% Q/q
  •   May 27, City Downgrades SJM Holdings to Neutral on the Oceanus Transaction
  •   May 24, Macau Gaming Bonds Rally From Lows After China Economic Stimulus
  •   May 20, Bloomberg Intelligence’s Macau Monthly Visitation Updates
  •   May 19, DOJ Sues Steve Wynn to Force Him to Register as China Agent
  •   May 18, Macau Casino Bonds Are Sliding in Worst Streak in Months
  •   May 14, Macau Mulls Casino Tax Cut as Gaming Revenue Plummets
  •   May 1, Macau Gaming Income Falls to New Low on China Omicron Outbreaks