Asia Op 2023 Earnings Remain Below 2019 Levels: Moody's

While the Singapore casino market's dual monopoly and Malaysia's casino monopoly are each likely to recover from 70% in 2022 to 90% of pre-pandemic gaming grosses (GGRs) this year, Macau could reach up to 50% of 2019's GGR in 2023. That's the conclusion of Wednesday's research note published by Moody's.

"China's reopening will boost Asian gaming revenues [in 2023], but it will not fully recover from the pandemic [impact]," the note added. "We do not expect Asian gaming operators' revenues to fully recover to pre-pandemic levels in 2023."

While Macau's GGR has surged since border restrictions were lifted in January, the Moody's team expects annual GGRs this year to rise to between 45% and 50% of 2019 levels and then 60% of pre-pandemic levels in 2024. That compares with 14% of 2019 levels last year.

"This reflects a recovery in the mass market sector, while continued tight restrictions on junket operations will leave the VIP sector sluggish," the note added.

Recently, many brokerages have expressed optimism about the pace of earnings recovery in Macau's large market gambling sector compared to 2019.

"The VIP segment accounted for about half of the total GGR in 2019, but we expect its share to fall to about 10-15% in 2023-24," Moody's said.

Nevertheless, the credit rating agency said, "the mass market segment with significantly higher margins than VIP will drive the overall gains in Macau's GGR."

"This means that the pace of earnings recovery for Macau operators will be faster than the pace of earnings recovery," Moody's added.

Macao's mass GGR is estimated to improve to about 75% and 100% of 2019 levels in 2023 and 2024, respectively.

Moody's said most Asian operators had "sufficient liquidity over the next 12-18 months," driven by the fact that most companies had "limited short-term maturities over the next 12-18 months."

"Adjusted EBITDA [earnings before interest, taxation, depreciation and amortisation] and leverage as measured by debt/EBITDA will improve for all Asian game operators assessed in ″ 2023-24," the note said.

Moody's said it expects debt levels at Macau-focused operators to "gradually decline during 2023-24 as they begin to generate positive free cash flows." Although leverage "will take until 2025" before returning to levels "more consistent" with current rating categories, it added.

"The leverage of Southeast Asian operators will also improve in the next 12 to 18 months," Moody's said, referring to the bidding process in upstate New York, adding that Genting Bhd's leverage trend could be affected by New York's casino license applications.

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