Macau GGR Slips, Operators Try to Shrug Off Problems

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The gross gaming revenue (GGR) in Macau fell by 12% week-on-week. This was due to an increase in the COVID-19 infection rates in mainland China, as well as a collapse of the local VIP sector following Suncity Group’s troubles.

Macau GGR Still Unstable

The weekly GGR update by Bernstein analysts Vitaly Umansky and Kelsey Zhu showed that the average daily revenue for the seven days between December 6 and 12 was MOP$229 million ($28.5 million). This is down from MOP$260 million ($32.4 million) in the previous week due to lower Macau visitation.

According to the latest statistics, there has been an 18% drop in daily arrivals and departures, which stands at 47,300. Yunnan, Heilongjiang Shanghai, and Heilongjiang are all reporting new COVID-19 cases.

More problematic is the 35% to 40% drop in daily VIP rolling volume. Suncity Group closed all of its Macau VIP rooms on December 1. It then announced last Friday that it would cease its junket business completely. Tak Chun Group confirmed that it received notices from two operators that their junket contracts were being terminated. Most, if not all concessionaires, are expected to follow suit by the end of the year.

December Performance

Macau’s GGR for the month is MOP$2.9 billion ($362 million), with an average daily rate of MOP$242 million ($30 million). This represents a 67% decrease from December 2019, and a 4% drop from last December. However, it is 7% higher than last month, which had GGR at MOP$6.75 billion ($840 million).

Bernstein estimates that December’s GGR will be 68% lower than December 2019, which was MOP$22.84 billion ($2.84 billion). However, at that rate, it would be 8% more than November.

Fitch Puts Gaming Operators On Alert

Fitch Ratings has placed certain Macau concessionaires, along with their associated subsidiaries, on Rating Watch Negative (RWN). Las Vegas Sands and MGM Resorts are now RWN because of the uncertainty about the timing and procedures for license re-tendering.

The agency also expressed concern about Macau’s COVID-19 recovery possibilities. This is due to China’s “zero COVID” policy. The ratings agency expects that this will lead to another difficult year for gaming revenues in 2022.

The RWN is applicable to LVS group entities Las Vegas Sands’ (LVS) Sands China Ltd and Marina Bay Sands Pte Ltd., as well as MGM Resorts International and SJM’s Long-Term Foreign Currency Issuer Default ratings and senior unsecured note ratings of “BB+.”

The RWN “reflects the material near-term regulatory uncertainty related to [each] gaming concession in Macau, whose 20-year term is set to expire on June 26, 2022,” according to Fitch. “Near-term credit risk has increased with limited visibility into the re-bidding procedure, how the future regulatory and operating environment will impact cash flows and leverage, and the likelihood of incumbent operators’ ability to secure new gaming concessions.”

Fitch analysts stated that they believe LVS, MGM and SJM will continue to operate in Macau; however, the RWN shows the negative credit impact that failures to secure a new concession or more restrictive economic licensing conditions could have on the financial health of the country.

Fitch added that it is also monitoring China’s COVID-19 policies. It previously predicted a return of 90% to 2019 GGR levels by 2023. This estimate was dependent on a return to more normalized visitor levels quickly. That, however, hasn’t happened.

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