Gearing easing to take time for some Macau ops: Fitch

Deleveraging “will take time” for some of the Macau casino operators, “despite the improvements” in the sector’s business outlook, said Fitch Ratings Inc in a Wednesday memo, offering some commentary following the Chinese New Year trade.

Fitch said it expected Macau’s gaming industry “to improve in 2024, bolstered by a steady recovery in inbound tourism, which was particularly evident during the recent Chinese New Year holiday period”.

The institution added: “The upswing in visitation and gaming revenue is likely to aid Fitch-rated casino operators with a presence in Macau in reducing their debt levels.”

But it stated: “Upside potential in their ratings is constrained by their elevated leverage metrics, as deleveraging will take time for some of the operators, despite the improvements.”

Overall visitor arrivals to Macau during the eight-day Chinese New Year (CNY) festivities reached almost 1.36 million, the Macao Government Tourism Office (MGTO) announced on Sunday. The average hotel occupancy rate for the period stood at 95.2 percent, as detailed in the same press release.

Fitch stated in its update: “This influx reinforces our expectation of a recovery in Macau’s gaming sector for the rest of the year, despite the economic headwinds facing China.”

The agency added: “This resilience is in part due to a shift in Chinese consumer preferences towards service-oriented sectors, like domestic tourism and entertainment.”

The Macau casino market’s daily run-rate for gross gaming revenue (GGR) for part of Chinese New Year “likely hit the MOP1 billion-plus [US$124.1-million] mark for the first time in over four years,” said JP Morgan Securities (Asia Pacific) Ltd in a Monday note.

For its part Fitch observed the recent “influx of tourists” to Macau is likely to boost casinos’ gross gaming revenue (GGR), with the mass-market segment already registering revenues in the fourth quarter of 2023 that exceeded 2019 levels by 4 percent.”

Though it added: “The VIP segment, however, is on a slower path to recovery and unlikely to return to pre-pandemic revenue levels in the near future. This slower rebound in the VIP segment can be attributable to recent years’ regulatory tightening in China’s treatment of gaming tourism and the broader economic challenges facing China.”

Banking group Nomura had said in a Sunday memo after the official end of the lunar new year festivities for mainland residents: “We think the improvement in overall cross-border travel during the Chinese New Year holiday was still mostly boosted by travel between the Chinese mainland and Hong Kong/Macau, while the recovery of cross-border travel between China and the rest of the world remained lacklustre.”

 

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