It was just a couple of months ago that the gambling hub of Macau completely shut down due to the coronavirus pandemic. Things started to return to normal recently and life was being breathed back into the city, but it didn’t take long for COVID-19 to once again start to appear. Despite the presence of the virus, with only a very small handful of cases seen in this second round, casinos are going to need to continue their operations. This isn’t because gamblers need to gamble, though. It’s because workers need to work.
Macau’s new Secretary for Economy and Finance, Lei Wai Nong, who just took his position at the end of last year, was asked by a reporter during a public appearance yesterday if there was the possibility that the city’s gambling venues would be allowed to close their doors, even if they agreed to support their employees. Lei pointed out that the casinos are required to “operate 24 hours a day, 365 days a year,” adding, “The decision [to suspend operations] is up to the government. As of now, we don’t have any plan to change the existing regulations… [Keeping casinos operational] is because the gaming industry is not only providing (gambling) services, but also guarantees the employment of over 58,000 employees.”
Gross gaming revenue in Macau (GGR) plummeted in February and March, and April is expected to be even worse. Some analysts predict that growth this month will be nil compared to last April. However, Lei believes that the city is fine. He asserted that the GGR reduction in March was within parameters established by city officials, and added that casinos are not eligible to receive a piece of the MOP10 billion ($1.25 billion) that the government has earmarked to help local businesses with their economic recoveries.
The reason for not offering the casinos a handout is simple. According to the Bernstein brokerage, they don’t need it. Company analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu said in a memo yesterday on the financial state of Macau’s casinos, “While there are no medium-term (less than six months) concerns around liquidity, the longer the revenue drought continues, the spotlight will shine brighter on individual companies’ liquidity. All operators have at least six months or so of breathing room before needing to draw on any additional debt financing, which all operators will be able to do via their revolvers at a minimum (before needing to find other liquidity). If the no-revenue environment were to last longer, all operators have at least 15 months or so of breathing room (except for Studio City, which has only a year) before running out of existing liquidity.”