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The existing COVID-19 border control measures for Macau will soon be relaxed and the resumption of e-visa (electronic Individual Visit Scheme) and group tours could be realized as soon as early November, said Macau chief executive on Saturday.
The announcement is the most significant policy easing since the Macau-China border was reopened more than two years ago and at least some Macau gaming operators can turn EBITDA positive in the fourth quarter of 2022, J.P.Morgan said in a note.
It should have an immediate impact with mass GGR tipped to recover to 25% to 30% of pre-COVID levels in 4Q22 and then ramping up sequentially to around 85% by the end of 2023, and it should also be enough to see at least some concessionaires return to profitability before 2022 is out, it said. “Most operators can turn EBITDA positive when mass GGR hits around 30% to 35% of pre-COVID levels, indicating some companies can start to print positive profits from 4Q,” the bank said.
“FCF (free cash flow) break-even can be achieved at around 50% to 60% of mass GGR recovery for most operators, except Galaxy (which can print positive FCF at sub-30% recovery thanks to net cash) and SJM (which probably needs near-full recovery to recover opex from GLP and satellite casinos).
“The timing/magnitude of easing is earlier/better than expected, adding conviction to our bullish stance on Macau gaming,” Kim said. “Although it’s tough to quantify the immediate benefit, we believe the resumption of eVisa and group tours should alleviate friction for a Macau trip, as well as signal to many that it’s OK to visit Macau, in turn boosting demand into the year-end holidays and 2023.”
“Finally, we feel we can talk about a return to normalcy.”
Among Macau’s casino shares, JPMorgan’s top pick was Sands China, followed by Wynn Macau and Galaxy Entertainment.