Gaming operators with strong premium mass segment first to benefit from market recovery

After individual and group tourist visas for Zhuhai were resumed on August 12, the visa scheme was reinstated for Guangdong Province on Wednesday (August 26), and will resume for the whole of Mainland China on September 23.
However, so far no large increase in visitor numbers to the city has been reported, but the daily average of tourist entries has slowly reached almost 10,000.

Bernstein analysts are predicting that September will start reporting some revenue recovery, following by a pickup later in the autumn and winter months, with fourth quarter results to ‘be more than enough’ to achieve EBITDA breakeven.

The brokerage also expects 2020 to end with a 71 per cent year-on-year drop in gross gaming revenues, followed by a robust recovery in 2021.

‘While the rising tide lifts all boats, Melco and Wynn Macau should seize greater advantage early in the recovery as high end VIP and premium mass customers with pent up demand and easier ability to travel should come back first. While increasing volume of visitors will the masses, the recovery in mass and lower end premium will take more time,’ the brokerage noted.

MGM China and SJM, meanwhile, were seen as ‘relatively weaker positioned’ for recovery, as MGM China will likely face more difficult ramp up in light of growing Cotai competition and SJM was still struggling to open its Grand Lisboa Palace.

Still, VIP in 2021, and to a lesser extent some premium mass, could be negatively impacted by any significant increase in ant-corruption activity and capital control tightening by Chinese authorities.

On the other hand, Bernstein considered that there were indications that mass and premium mass will recover, including housing prices and macroeconomy indexes, coupled with pent up demand, as customers have not been able to get to casinos since last year.

These indicators included China’s domestic air passenger volumes, which have already recovered to about 73 per cent of last year’s level; robust China duty-free shopping and holiday travel to Hainan, and with strong premium auto sales have signaling a desire to spend by demand from China’s premium consuming class.