Casinos Macau Gaming – Gross gaming revenue recovery path; more value in laggards

We expect individual visit scheme (IVS) to resume in June/July, starting with Guangdong. We expect pent-up gaming demand and the diversion of international travel demand to Macau to drive the initial gross gaming revenue (GGR) recovery.

04 Jun 2020

Macau quarterly GGR* from Q106 to Q120 by split (VIP and mass+slot) from Q106 to Q120 (yoy%)

Source: Macau DICJ, Company data, CEIC

This line graph shows Macau's quarterly GGR from first quarter 2006 to first quarter 2020, split by VIP, mass+slot, and visitor arrivals.

Higher recovery visibility and lower balance-sheet risks

The lowering of the COVID-19 emergency response level and recent talks of a travel bubble between Guangdong, Macau and Hong Kong provide higher visibility on a possible near-term recovery, in our view. We expect a partial resumption of the Individual Visit Scheme (IVS) from June/July, starting with Guangdong.

Recovery driven by pent-up demand and diversion from international travels

We expect pent-up gaming demand and diversion of international travel demand to Macau to drive the initial GGR recovery, given the likely continuation of international travel restrictions and safety concerns for Chinese tourists. The offsetting factors could be potential visa quotas and social-distancing measures in Macau. While consensus is for VIP to recover before mass, we believe this may not transpire, particularly if the addressable markets are restricted to Guangdong and Hong Kong initially, which have a higher mass market mix than VIP.

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