Casinos to reopen, but recovery not imminent: Nomura

Tuesday 18th of February 2020

Macau’s casinos can begin to reopen from midnight on Thursday, however there is unlikely to be any improvement in visitation until China resumes its individual visit schemes (IVS), which may take a further six weeks, Nomura Instinet analyst Harry Curtis warns.

“The consensus among local operators we connected with over the weekend is that there will be little material improvement in visitation, GGR and EBITDA until the IVS and tour group customers are permitted to cross the border, which may not normalize for another six weeks,” he wrote.

Curtis said the reopening is an “empty gesture” given Macau’s almost complete reliance on tourism from Mainland China. “The reopening is akin to keeping a body alive without the food required to sustain it.”

He argues that reopening casinos is likely driven by the government’s commitment to having the operators eat the operating costs. If the shutdown lasts for longer than 30 days, the operators may have a legal basis to furlough workers.

“In our view, the government(s) will reopen the IVS and tour systems gradually and regionally once no new cases have been identified.”

Operators have already warned of significant daily losses as a result of the shutdown, with Wynn Macau disclosing a daily operating loss of $2.5 million, or $75 million a month, while MGM disclosed a daily loss of $1.5 million.

Secretary for Economy and Finance, Lei Wai Nong, said the decision to reopen casinos had been made following an extensive assessment of risks.

The government has discussed measures to be taken with operators, which included: the need for thorough checks at all casino premises; the imposition of body-temperature checks at casino entrances; a requirement that all employees and patrons each wear a face mask; and an adjustment in the distance between gaming tables.

The government has also put restrictions on non-resident workers as of midnight Thursday, who will only be permitted to enter from China once they have been through 14 days of quarantine and received a health certificate from authorities in Zhuhai. Those returning from other destinations will need to undergo 14 days of observation in Macau at their own cost.

To minimise cross-border travel by workers, the government is asking employers to help resolve accommodation issues in Macau.