Officials of Macau have kept up with strict regulations since the onset of COVID-19 to keep the virus from attacking the SAR. Few cases have been seen in the region thanks to strict quarantine orders and travel restrictions. Casinos in Macau have been trying to recover over the past few years, but the restrictions have kept venues from reaching pre-COVID numbers. Now, a new outbreak is going to test the limits of the casinos, possibly causing liquidity issues and a need for funding.
New COVID-19 Outbreak
Over the weekend, health authorities in Macau announced that 12 cases of COVID-19 were seen in the region. Later on, a total of 31 cases were confirmed. Gaming analysts now feel that the casino industry, which is already struggling, will be substantially impacted by the news. The gross gaming revenues (GGR) for the SAR are expected to fall to close to zero.
According to reports, JP Morgan’s DS Kim and Livy Lyu say that while casinos are operational as of now, it would not be surprising to see GGR reach near zero for a few weeks. The inbound visitation rates will be minimal if any.
The analysts say that the Secretary of Finance in Macau has said that casinos will not shut down, and visitation issues will come into play. Visitation to Macau will be limited severely and perhaps even blocked due to the virus. Revenues will drop considerably for a week or maybe longer depending on how long the outbreak lasts and its extent.
Liquidity Will Become a Concern
Liquidity will become a concern for casino operators with no revenues coming in. Officials just revealed that operators of gaming facilities must have MOP$5 billion ($625 million) in net assets that are set to the side within its concessionaires if they want to win a new concession and retain it during the re-tendering process later in 2022.
It looks as though the amount must be maintained in cash while the tender process is ongoing and before operations under the new concession take place if the operator is approved. The cash needs to be held separately from any cash that is held by entities of the concessionaire.
Analysts have revealed that Sands and SJM have the shortest liquidity, with funds only available through March 2023. Other operators like Melco, Wynn, and MGM have enough liquidity to get through the COVID-19 outbreak, with up to two years of liquidity in place. Galaxy can get by even longer with around five years of liquidity.
It is expected that all operators will be able to weather the new outbreak, though some will feel pressure on liquidity.
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