Global investment bank Credit Suisse has revised down its estimates for Macau’s short-term GGR recovery, predicting gross gaming revenues will only reach 80% of 2019 levels in 2024. It had previously estimated a recovery to 98%.
In a Wednesday note, analysts Kenneth Fong, Lok Kan Chan and Sardonna Fong said the revised estimates were primarily based on the recent news that mainland China was increasing efforts to prevent cross-border gambling by placing added restrictions on frequent gamblers.
“We believe restrictions on frequent gamblers, especially outside of Guangdong, are going to stay amid China’s anti cross-border gaming effort, even if the COVID impact normalizes in the future,” they wrote.
The analysts have also lowered their target prices for Macau concessionaires by between 10% and 59% to reflect the weakness in demand. This assumes relaxation of some border restrictions no earlier than in 1Q23, a 1% increase in Macau’s gaming levies as per the new gaming law and initial low mass margin due to higher marketing expenses for leisure players.
“The sector should see limited downside as it stops reacting to negative news with low expectation, yet it lacks catalysts with minimal earnings (if not losses) near term,” they said.
“While long-term investors may choose to accumulate and wait, a higher risk-free rate now and highly uncertain recovery timing make it strategically less attractive. We suggest waiting for more solid signs of a sustainable GGR recovery. Historically, a gaming cycle rally normally lasts for 1.5 years on average.”
The Credit Suisse estimates come a day after Macau authorities revealed just 330 tourists had entered Macau on Tuesday, down 99.7% on the 2019 daily average, due to the SAR’s largest COVID-19 outbreak since the start of the pandemic.