Dealer Net Debt Could Hit $25 Billion By Year End – Brokerage

The net debt of the six local gaming dealers could reach $25 billion by the end of this year if tourism and pandemic conditions do not improve, Morgan Stanley analysts have warned.

The brokerage noted in a report that this estimate assumes China’s current strict travel restrictions remain in place for the remainder of 2022 and mass incomes remain at
March/April levels, about 18% of pre-COVID levels.

March and April saw record gross gaming revenue for the past two years, first at MOP 3.6 billion and then at MOP 2.6 billion.

The total amount for the first four months of the year fell 36% year-on-year to some MOP 20.4 billion.

“If the easing of travel in China is delayed to [the second half of 2023]Macau’s net debt could increase by another $2 billion, to $27 billion by the end of 2023, according to our estimates,” Morgan Stanley noted.

Nevertheless, the brokerage firm indicated that Macau operators, except SJM, could maintain cash burn rates in the first quarter of this year, including development investments for about two years based on current cash and unused cash.

A previous dispatch from SJM Holdings claimed the group had a ‘critical’ need to bolster its financial liquidity due to repeated operating losses as it remained the only gaming dealer to fail to break even in earnings. exploitation since the Chinese visit to Macao. resumed in September 2020.

“SJM’s cash could only be sustained for five months based on its 1Q22 burn rate, but with unused cash after refinancing, it could last 20 months,” the report warned.

Ann J. Cox