Ratings agency Fitch described on Thursday as “constrained” the likelihood of any further upside potential to the ratings of Macau’s concessionaires, with deleveraging expected to take time for some operators.
That’s despite the agency offering a positive outlook for 2024, when it expects a 15% increase in Macau’s economic output and a significant reduction in debt by most concessionaires.
In a note, Fitch said it expects Macau’s gaming industry to improve in 2024, bolstered by a steady recovery in inbound tourism, which was “particularly evident” during the recent Chinese New Year holiday period.
It also cited a clear shift in Chinese consumer preferences towards service-oriented sectors, like domestic tourism and entertainment, which has helped shield Macau from the impact of China’s economic downturn.
However, having recently revised upwards the ratings of both SJM Holdings and Sands China parent Las Vegas Sands, Fitch explained that any further positive ratings action was unlikely in the short-term.
“The upswing in visitation and gaming revenue is likely to aid Fitch-rated casino operators with a presence in Macau in reducing their debt levels,” the agency wrote. “However, upside potential in their ratings is constrained by their elevated leverage metrics, as deleveraging will take time for some of the operators, despite the improvements.”
It added, “We do not see significant further upside potential in the issuers’ ratings in the near term, as reflected by their Stable Outlooks. SJM’s leverage metric, in particular, remains high and is likely to fall to its rating thresholds only in 2026, in our view. There is also a risk that the recovery in Macau’s gaming revenues could be slowed by possible policies to tighten capital outflow from the Chinese mainland.”
Nevertheless, Fitch maintained a positive stance on the prospects for Macau’s economy over the year ahead, having previously affirmed the SAR’s rating at “AA” with Stable Outlook in March 2023, “reflecting its robust public and external finances and continued economic and gaming recovery.”
