Morgan Stanley: Macau Casinos Face Worst Ever Quarter Results

The financial results from the second quarter of 2020 for the Macau casinos are yet to be announced but Morgan Stanley already painted a picture of doom and gloom, estimating the industry is on course for more than $1 billion loss in Q2.

June Casino Revenue Down

Last week the Gaming Inspection and Coordination Bureau, the casino regulator in the Special Administrative Region (SAR) of China announced that casino gross gaming revenue (GGR) declined by 97% in June year-on-year. On a month-on-month basis, the June result is 59.4% down compared to the month before. The May GGR slumped 93% compared to the same period in 2019.

Operating Costs

Sands China, the Chinese subsidiary of Las Vegas Sands (LVS), is estimated to have the highest operating costs during the second quarter of 2020, $4.3 million per day, with the rest of the pack below $3 million per day. Galaxy Entertainment Group is estimated at $2.9 million of daily operating cost, while Wynn Macau, Melco Resorts and MGM China are estimated at $2.6 million, $2.2 million and $1.6 million, respectively. Morgan Stanley’s analysts place the sixth casino operator, SJM Holdings, at $1.3 million of daily costs for operations.

Property Loss

Based on revenue projections from the recently posted June results and current operating cost estimations, Morgan Stanley predicts the casino industry in Macau to post in excess of $1 billion loss for the second quarter, compared to $2.4 billion gain for Q2 2019.

Sands China is expected to be the operator with the biggest property loss before interest, taxation, depreciation and amortization (LBITDA) for Q2 2020, $286 million, followed by Melco Resorts at $205 million, Wynn Macau at $172 million, Galaxy Entertainment at $155 million, MGM China with $117 million, and SJM Holdings at $100 million.

Travel Restrictions and Quarantine Measures

The casino industry in Macau is still very much within the tight grip of travel restrictions, mainly from mainland China to the SAR as there are restrictions to the issuance of visas from the Chinese authorities.  Besides, anyone who travels from Macau to the mainland would be subjected to a 14-day quarantine.

Regarding the other key jurisdiction that supplies gamblers for the Macau casinos besides mainland China, Hong Kong, travellers in both directions are subjected to a 14-day quarantine. Last week the Hong Kong Government extended by another month its deadline for the 14-day quarantine rule for arrivals from Macau, mainland China and Taiwan, to August 7