Investment bank JP Morgan has revised its earnings estimates for Macau’s gaming operators in 1Q23 upwards following the news last week that most border restrictions between Macau, mainland China and Hong Kong would be dropped from 8 January and ferry services between Hong Kong and Macau resumed.
As reported by Inside Asian Gaming, there is no longer any requirement for visitors to Macau from the mainland, Hong Kong or Taiwan to produce a negative COVID-19 test result upon entry, nor to declare their health status, while foreigners no longer face any quarantine requirement.
At the same time, ferry operators TurboJet and Cotai Water Jet both resumed sailings between Macau and Hong Kong on Sunday with an initial schedule of 10 round-trip sailing per day and rising over the coming weeks.
In response, JP Morgan analyst DS Kim issued a note on Friday describing the changes as “incrementally positive” for sentiment as “the path to normalcy is now ahead of what we/the market had expected.”
He also described his previous estimate of mass market GGR recovering to around 35% of 2019 levels in Q1 and for the Chinese New Year holiday period as “a bit too conservative” given the earlier-than-expected return of Hong Kong gamblers.
With this in mind, Kim said he now expects Macau’s concessionaires to print positive EBITDA in Q1 and positive free cash flow from Q2, reflecting GGR levels of better than 35% for the March quarter and at least 50% for the June quarter.
“And we wouldn’t be surprised if full recovery (mass/non-gaming GGR going back to 2019 levels) happens sometime in 2H23, much earlier than our current model of mid-2024,” he said.
The vastly improved estimate comes after Macau recorded GGR of just MOP$42.2 billion (US$5.3 billion) in 2022, down 51.4% on 2021 and the lowest single year total since 2004.