The sharp decline in gross gaming revenues currently being experienced by Macau’s operators will likely only stop in October, according to research analysts at investment bank Morgan Stanley.
In a Monday note, analysts Praveen Choudhary, Thomas Allen and Gareth Leung outlined their second round of revised estimates in as many months, cutting their FY20 GGR estimates for the Macau gaming industry as a whole to a decline of 35%, down from an earlier estimate of -16%, but increasing 2021 estimates to growth of 40%, up from an earlier estimate of 20%.
Notably, Morgan Stanley has highlighted October – extended from previous predictions of July – as the month in which GGR will likely stabilize and return to relatively normal levels.
“As COVID-19 has spread globally and travel restrictions have tightened across the globe, we delay normalization to October,” the analysts said.
“While consensus may expect 2021 to be similar to 2019, we believe there may be lingering concerns on group travel and entertainment, which could continue to weigh on the mass business (especially table games) for longer.
“While a weaker quarter in 2020 should not matter if our price targets are pegged to 2021, there is growing concern that our 2021 EBITDA may not reach back to the last peak in 2019.”
The research note also revises its quarterly estimates, with 1Q20 to fall by 60% year-on-year and 2Q20 by 56% year-on-year before improving to -18% in the third quarter and normalize to -5% in the fourth.
“We expect things to normalize by October and VIP to recover faster than the mass segment,” they said.
