Analysts forecast bright future for Macau 

by Ethan Anderson Last Updated
Coronavirus outbreak shuts Macau down but casinos remain open

The long-term outlook for the world’s largest casino hub is bright according to analysts at Morgan Stanley. reports that despite regulatory risk from Beijing, Macau’s concessionaires are in a good position, even if they have had some recent woes.

Recent gross gaming revenue data suggests that despite an increase in COVID-19 cases in neighbouring Guangdong province and the persistent lack of a travel bubble with Hong Kong, things are starting to trend the right way for Macau.

There are considerable overhangs to overcome and it will likely take longer than 2021 to deliver operator equities.

“We think initial underperformance can be explained by new COVID cases in Guangdong in June and no travel relaxation between Hong Kong and Macau,” analysts said.

Cost savings help Macau casino weather COVID storm

Like their US counterparts, Macau operators proved adept at cutting costs and boosting margins as a result of the pandemic.

Led by a 46 per cent slashing at Melco Resorts and Entertainment, Macau operators on average, trimmed operating costs by 35 per cent since the health crisis started.

As such, Morgan Stanley forecasts the companies need GGR to return to just 80 per cent of pre-pandemic levels to get earnings before interest, taxes, depreciation and amortisation back to 2019 highs.

“We remain constructive in the hope of the border opening and eventual extension of licences, both of which we expect in second-half 2021,” said the bank.

Global investors remain wary

With China cracking down on internet companies, especially those with heavy consumer facing businesses, hundreds of billions of dollars have been wiped off companies like Alibaba, Didi and Tencent in recent times.

In late July, Beijing called an emergency meeting with major international asset managers and investment banks, looking to allay fears about the regulatory crackdown.

While Macau concessionaires aren’t targets of the probe, Morgan Stanley points to something of a mixed near-term outlook as a result of that overhang.

“We believe the recent launch of China’s ‘common prosperity’ plan is not supportive of gaming in Macau, but a hardened stance on gambling, especially overseas, is not new either,” analysts said.

Prevailing wisdom is that Beijing isn’t looking to end land-based gaming in Macau, but rather to eradicate online gaming, which is forbidden in the world’s second-largest economy.

Prevailing wisdom is that Beijing isn’t looking to end land-based gaming in Macau, but rather to eradicate online gaming, which is forbidden in the world’s second-largest economy.

All six concessionaires are supposed to be up for licence renewal in 2022.

But that process is being delayed because of the pandemic.

Gaming licence extension likely in 2025

Morgan Stanley said that it’s likely Macau will extend all gaming licences for another three years before a more conventional retendering process commences in 2025.

Some experts estimate that without renewal of the individual visit scheme visa with the current travel protocols, up to 47 per cent of prior Macau visitation is out of the picture for the time being.

The individual visit scheme allows travellers from China to visit Hong Kong and Macau on an individual basis. Prior to this, mainland residents could only visit on business visas or on group tours.

In the meantime, the special administrative region appears to loathe to consider another casino shutdown to deal with the pandemic, but that also implies the on-off travel restrictions are likely to remain in place.

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