Analysts revise down Macau GGR estimates for 2021 on slow Hong Kong border opening

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Gaming industry analysts have revised down their estimates for Macaus FY2021 gaming revenues following this weeks news that a reopening of the border between Macau and Hong Kong would be slower than previously hoped.

As reported by Inside Asian Gaming, officials of the two SARs agreed Monday to ease restrictions if Hong Kong, currently 17 days COVID-free, can reach 28 consecutive days without any locally acquired cases of COVID-19.

The 28-day stipulation is double the 14 days Macau had previously suggested for removing mandatory quarantine requirements on those arriving from Hong Kong and even then will only see Hong Kong residents welcomed back in phases. The initial phase would include a quota system under which only fully vaccinated Hong Kong residents currently representing around 18.8% of the population would be welcomed.

JP Morgans DS Kim, Derek Choi and Livy Lyu said in a Tuesday note they were somewhat disappointed by the seemingly limited scale (at least initially) of the travel bubble plan, as well as the slower-than-expected timing of launch.

This lessens the prospect of a strong uptick in GGR in July and possibly even August, leading us to curb our enthusiasm for the summer holiday, they said.

The analysts have revised down their 3Q21 estimates from 50% of 2019 GGR to 43% and 4Q21 estimates from 66% to 58%. For FY2021, JP Morgans GGR estimate has been revised down 5% to 43% of 2019 levels.

Credit Suisse analysts Kenneth Fong and Lok Kan Chan have also revised down their 2021 estimates from 46% to 40% of 2019 levels.

Recovery path could be slower than expected, evidenced by the China regional COVID-19 outbreaks in February and June, they wrote.

The benefits of potential border reopening with Hong Kong are also not meaningful at around 10% to 15% of GGR, with the upside capped by the restrictions.

JP Morgan noted that Hong Kong has traditionally been a key channel for travel between Macau and the mainland with many players combining trips to Hong Kong and Macau into one.

Many premium mass players also get gambling funds from Hong Kong bank and insurance accounts, they said. All in, we guesstimate Hong Kong (Hong Kongers plus Chinese coming via/with Hong Kong) would probably account for 20%+ of GGR for the mass segment pre-COVID, hence the full-scale border reopening could lead to a step change in the demand run-rate, in our view.