Macau GGR Could Perk Up as Soon as Early 2023

Posted on: December 27, 2022, 07:31h. 

Last updated on: December 28, 2022, 03:01h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

After nearly three years of dashed hopes and disappointments, Macau gross gaming revenue (GGR) could finally swing higher in 2023. That recovery could start almost as soon as the calendar changes to January.

Macau casinos
Casinos on the Cotai Strip in Macau. Operators could see GGR increase as soon as next month. (Image: Bloomberg)

In a new note to clients, UBS analyst Angus Chan acknowledged the changes afoot. While there are still some coronavirus-related protocols for inbound travelers to the special administrative region (SAR), benefits should accrue to Macau concessionaires. That’s thanks to the removal of China’s zero-COVID policies.

Chan pointed out that while a nucleic acid test requirement remains in place, visitors to the Asia-Pacific casino hub will no longer be required to quarantine for five days in addition to a three-day home isolation mandate. Both mandates will be scrapped on Jan. 8.

Chan added that the “effective removal” of quarantine requirements in China could propel Macau GGR higher as soon as early 2023. Between the removal of COVID-19 mandates and pent-up demand, his projections could prove accurate. That’s though recent consensus wisdom held that it would be 2024 before gaming revenue on the peninsula would recover in material fashion.

Macau 2023 Outlook Brightening

The six Macau operators are Galaxy Entertainment, Melco Resorts & Entertainment (NASDAQ: MLCO), MGM China, Sands China, SJM Holdings, and Wynn Macau. All of those companies recently had their licenses renewed for 10-years.

Permit renewal is another example of an overhang that’s been removed from the Macau recovery thesis, indicating that it could gain potency in 2023. That’s particularly if pent-up demand speculation proves accurate. The near-term challenge is how China handles what will undoubtedly be a massive near-term spike in coronavirus cases.

Because of the country’s lengthy, prohibitive shutdowns and zero-COVID policy, herd immunity is essentially off the table. By some estimates, China could experience 5,000 new coronavirus cases per day and as many as one million deaths next year.

As just one example of the rapid spread of the virus since the zero-COVID measures were scrubbed, it’s estimated that half of Macau casino workers are COVID-19 positive.

What to Expect in Macau 2023

While China can change COVID-19 policy on a dime without having to deal with legislators, the base case for the SAR’s gaming industry in 2023 assumes casinos there will be open the bulk of the year. That’s while operators will work to bolster nongaming amenities and reduce debt burdens.

Those are crucial factors, not only because the concessionaires need to make those investments to appease local regulators, but also because the group saw its debt surge since the start of the coronavirus pandemic. That’s prompted some analysts to forecast that it will be multiple years before the casino companies can repair the balance sheets to pre-COVID form.

In terms of gaming specifics, the widely held view is that concessionaires with the most exposure to mass and premium mass players will be the first to rebound. That’s while more VIP-dependent operators could be somewhat sluggish due to the death of the junket business.