Macau’s casino industry, plagued by a massive decline in visitation during the market’s traditionally busiest time of the year, could experience as much as a 21% drop-off in January gaming revenues, warned one Hong Kong-based gaming analyst.
Efforts by China and the special administrative region’s government to curtail the spread of the coronavirus through travel restrictions and other means have reduced visitation to Macau by 69% during the always lucrative Chinese New Year holiday.
On Monday, Macau visitation was down 84%.
Macquarie Securities gaming analyst Edward Engel said Tuesday visitation over the past two days to Macau has averaged roughly 40,000 visitors. As a comparison, September visitation, which is seasonally Macau’s slowest month, averaged roughly 90,000 daily visitors.
Engel said lack of visitation has reduced the average daily revenue at Macau’s casinos over the first few days of the Chinese New Year to roughly half of what was collected through January 19. He expected the trend to continue.
As of Monday, there have been seven confirmed cases of the virus in Macau. There have been more than 4,600 cases in Mainland China.
“Last week, investor concerns focused on the magnitude and duration of gross gaming revenue declines,” Engel said in a research note. “However, more recent concerns have focused on the likelihood of operating losses or even casino closures.”
Engel said casino closures “would be a last resort,” although the region’s chief executive acknowledged the possibility.
On Tuesday, the Macau News Agency reported the Hong Kong Maritime Department was suspending high-speed ferry services between Hong Kong and Macau. Authorities in Mainland China have reportedly stopped issuing travel permits to Macau.
Before the coronavirus spread, analysts had been hopeful Macau’s gaming market would recover during January after casino revenues in the market declined 3.4% in 2019, the special administrative region’s first annual revenue drop since 2016.
There was one piece of good news for investors Tuesday; the stock prices of the three Nevada casino companies that operate in Macau, rebounded somewhat, one day after their steepest declines since the outbreak of the coronavirus was first noted.
Shares of Las Vegas Sands Corp., which has the largest footprint in Macau of any Nevada casino company, grew $1.14 or 1.80% on the New York Stock Exchange to close at $64.41. Wynn Resorts increased $1.08 or 0.87% on the Nasdaq to close at $124.97.
Sands and Wynn each draw more than 60 percent of their quarterly revenues from Macau.
#exclusive – Analyst predicts coronavirus could impact Macau January revenues by more than 20%. –@howardstutz, CDC Gaming. https://t.co/qZMyouWynM #CDCgaming
— CDC Gaming (@CDCNewswire) January 28, 2020
Shares of MGM Resorts International increased 62 cents, or 2.04% to close at $30.97 on the New York Stock Exchange.
Engel said the Macau stocks have declined 10-20% since the virus fears began. He said long-term investors would find value in the stocks.
“While investors are already expecting a significant decline in gross gaming revenue, we don’t believe casino closures are fully priced in,” Engel said.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
