Fitch expects Singapore and Malaysia to reach pre-pandemic levels by 2023, whereas Macau’s outlook remains challenging, the firm’s Global Gaming Outlook from senior director Colin Mansfield, finds.
Fitch expects gaming revenues in Singapore and Malaysia to ramp up to around 80% of pre-pandemic levels in 2022, and then to around 95% in 2023. This follows a jump in revenues in both countries following the lifting of movement restrictions in April 2022.
In Singapore, the reopening of international travel from 2Q22 drew pent-up demand from across APAC. Fitch expects Singapore’s gaming and non-gaming demand to recover fully to 2019 levels in 2023, with upside potential if Chinese tourists return.
Gaming demand is already near 2019 levels despite overall visitation to Singapore only at around 50% of 2019, thanks to strong local demand. The healthy demand will help the two operators absorb slightly higher gaming taxes that come into effect in 2022 as part of their concession extensions in 2019.
Singapore’s fast recovery has also been supported by APAC customers’ limited ability to enter Macau.
In Malaysia, EBITDAR margins for Genting Malaysia, the country’s sole operator, were boosted by a pandemic-driven workforce cut. The company does not anticipate headcount to return to previous levels despite additional hiring. Fitch expects that this, along with a robust revenue recovery, will help GENM’s margins remain above 2019 levels from 2022.
Macau distant recovery
Macau visitation should improve in 2023 thanks to additional e-visas and group tours. However, Fitch continues to expect changes in public-health policies that make conviction in 2023’s outlook challenging.
Fitch forecasts gross gaming revenue to be 50% of 2019 levels in 2023, before improving to 70% by 2024. Continued relaxation of strict coronavirus policies could result in a materially faster rebound in visitation and revenues.
The concession re-bidding process is due to be completed by end-2022, at which time Fitch expects to resolve any Rating Watches and take appropriate rating actions, depending on the final terms’ impact to cash flows and balance sheets.
Fitch expects the focus to be on compliance with regulations and remediation efforts, as the two largest operators, Crown Resorts Limited and The Star Entertainment Group Limited, seek to return to suitability to retain their licenses.
SkyCity is still under inquiry, while all three remain under investigation by the Australian Transaction Reports and Analysis Centre.
The ratings’ firm expect higher compliance costs to reduce margins, with non-recurring expenses staying high in 2023 on continued investigations. However, resilient revenue from domestic mass gaming — even amid an economic slowdown — will support profitability, with revenues already returning to pre-pandemic levels.
The operators’ financial profiles are also likely to weaken following a combined AUD300 million in fines to date levied on Crown and The Star. Nevertheless, their strong financial flexibility and available levers, including asset sales, will support their ability to meet the payments, Fitch argues as more fines could be levied as other regulators conclude their investigations.