After suspending business for half a month, Macau casinos will be "open to welcome guests" from 00:00 on February 20!

41 gaming venues closed for 15 days before opening

On 17 February, the Economic and Financial Secretary of the Macao SAR Government, Li Weinong, announced at a press conference of the novel coronavirus infection response Coordination Center (hereinafter referred to as "the response Coordination Centre") that, according to the instructions of the Chief Executive, with effect from 00:00 on 20 February, the gaming and casino will be reopened under conditions.

According to public information, there are 41 casinos in Macau, belonging to six major casinos, including SJM Holdings (00880 HK), Galaxy Entertainment (00027), Wynn Macau (01128), Melco International Development (00200), MGM (China) (02282) and Sands China (01928).

Li Weinong pointed out that the government has set a buffer period for the opening of gambling venues, and if the relevant venues are not well prepared, they can apply for a delay of up to 30 days before reopening, that is, 30 days after 00:00 on February 20. all casinos must be fully opened. At present, the most important thing is to give top priority to the safety of all employees and guests. The Government will closely monitor the reopening of casinos, analyze the development trend of the COVID-19 epidemic and the risks of passengers entering and leaving Hong Kong, and make timely adjustments.

He said that the Government is currently working with six major gaming enterprises to carry out preliminary deployment for the reopening of casinos, adjusting the number of open gaming tables and the distance between gaming tables in accordance with the epidemic prevention guidelines of the Health Bureau, so as to enhance the safety factor; and all people entering casinos must carry out temperature checks, wear masks and cooperate with disinfection.

Back on January 22, the response Coordination Center released the first confirmed case in Macao; with the development of the epidemic, the ninth confirmed case occurred in Macao on February 4, with the infected person working in a gaming enterprise. On the same day, after consulting Zhong Nanshan, head of the high-level expert group of the State Health Commission, and after a comprehensive evaluation, Macao decided to close down casinos, lucky gambling establishments and other entertainment facilities from 00:00 on February 5. Among them, the business suspension period of gambling premises is half a month.

Affected by the news, Hong Kong stock gambling fell on February 4, with Galaxy Entertainment down 2.26%, MGM China down 2.19%, SJM Holdings down 0.90%, Wynn Macau down 1.67% and Sands China down 1.97%.

This suspension is the second in more than a hundred years since Macau's gaming industry was legalized in 1847. Business was first closed for 33 hours in September 2018 due to Typhoon mangosteen.

It is worth mentioning that under a series of effective epidemic prevention and rescue measures, the epidemic situation in Macao has been effectively controlled. As of 3: 00 p.m. on February 17, Macao has not had any new confirmed cases for 13 consecutive days. A total of 10 COVID-19 confirmed cases have been maintained, 5 cases have recovered and have been discharged, and the remaining 5 cases are mild.

At present, Macao's epidemic prevention and control work has not slackened. It is reported that since 00: 00 on February 20, if all non-local employees have been to the mainland within 14 days before entering Macao, they are required to be quarantined and observed for 14 days at a place designated by the Macao Health Bureau in Zhuhai, Guangdong, and can enter the country only after obtaining a certificate issued by the Zhuhai health department to be free of infection, Dr. novel coronavirus.

The "hard core" of the government and enterprises overcome the difficulties in fighting the epidemic.

The gaming industry has always been the "mainstay" of Macao's development. As of November 2019, lucky gaming revenue accounted for 85.85% of the SAR government's total revenue, according to the Macao Finance Bureau. Some institutions have pointed out that Macao's gaming industry loses about US $100 million in revenue every day when it goes out of business, which has dealt a heavy blow to Macao's economy, which is highly dependent on gaming revenue.

In fact, since 2019, the overall development of Macao's gaming industry has been stagnant. According to Macau government statistics, gross gaming revenue in 2019 was 293.31 billion patacas, down 3.5 percent from the same period in 2018; in January 2020, gross gaming revenue in Macau was 24.942 billion patacas, down 11.3 percent from a year earlier, following four consecutive months of year-on-year decline since October last year.

At the same time, affected by the pneumonia epidemic, the number of visitors to Australia showed a cliff decline. According to the Macau Tourism Office, compared with the same period of the 2019 Spring Festival (2019-02-04-2019-02-10), the total number of visitors to Macao during the seven-day holiday of the Spring Festival in 2020 was 261000, down 78.3 percent from the same period last year. 149200 mainland tourists visited Macau, down 83.3%.

In the face of the impact of the epidemic on the gaming industry and even the entire real economy, Macao Chief Executive he Yicheng said that the SAR government is not only concerned about the epidemic, but also concerned about how to revive Macao's economy after the epidemic, and how to take measures to stimulate domestic demand and people's employment. for example, infrastructure will be increased to promote employment and economy.

On February 13, the Macao SAR government announced an economic recovery plan, with a 30% reduction in supplementary tax, a 70% increase in occupational tax allowance, a complete exemption from residential housing tax in 2020, a six-month consumption tax exemption for all entertainment venues, an exemption from 2020 driving tax, a stamp duty and license fee exemption for all government applications, and a loan interest subsidy scheme for small and medium-sized enterprises, with an additional injection of 600 patacas into health care vouchers and a three-month exemption from water and electricity charges. 3000 patacas of electronic consumption coupons will be distributed to all residents.

At the same time, six gaming companies in Macau have also chosen to assume social responsibility, promising not to implement unpaid leave to their employees and are willing to continue to pay. Angela Leong, executive director of SJM Holdings, responded that the most important thing is to protect the lives of Macao people, so that the lives of more than 60,000 front-line employees in the gaming industry can be protected, so that they can stay at home and take care of their children who have been suspended, so that they can work together to fight the epidemic.

Organization: the gaming industry is expected to rebound and suggest bargain-hunting.

Industry insiders pointed out that the epidemic is an one-off incident, which may affect Macao's gaming industry in the short term, but when the epidemic improves and casinos reopen, gaming stocks are expected to rebound.

Judging from the trend of the secondary market, gaming stocks have gone out of a small wave of rising market since Macao announced the suspension of entertainment venues on February 4. The gaming index (BK1069,HK) has gradually stabilized since bottoming out on February 4, closing up more than 6 per cent as of February 17. In terms of individual stocks, SJM Holdings rose 7 per cent from its closing price on February 4; Galaxy Entertainment rose 11 per cent; and Sands China rose 8 per cent.

JPMorgan Chase & Co pointed out that the Macao government's decision to suspend the operation of local casinos for 15 days is expected to reduce Macao's gambling revenue by 75% in February and reduce the bank's annual EBITDA (profit before interest, tax, depreciation and amortization) by about 10%. China International Capital Corporation predicts that the half-month suspension of casinos could reduce EBITDA by about 7.3 per cent for the whole year, with gaming revenues falling 75-85 per cent year-on-year in February and 40-50 per cent in March.

At the same time, Morgan Stanley said that if the epidemic can be normalized in the summer, gambling revenues in Macao in the second half of this year are not expected to be affected. China International Capital Corporation also expects the epidemic to ease in mid-February and enter a stable period at the end of February and early March. In the quarter after the end of the epidemic, high-end demand is expected to boost the gaming industry to recover. At present, the valuation of the plate is already low, so investors are advised to increase their holdings at a bargain.

From the perspective of plate valuation, the value multiple of the gaming sector is currently at a three-year low in the industry, with less risk, and is expected to be in the stage of recovery; superimposed 2019 Macau gaming industry revenue is not as expected, the "20th anniversary policy gift package" is worth looking forward to.

Societe Generale Securities pointed out that even if there is no policy gift package, with the continuous optimization of Macao's gaming structure in recent years, the development of popularity and diversification has enhanced the anti-risk ability and profitability of the gambling industry, coupled with the continuous improvement of infrastructure, the overall valuation level of the sector should be in the upward channel.

It should be pointed out that with the imminent conclusion of the agreement on the first phase of the Sino-US trade negotiations, the domestic monetary liberalization, fiscal loosening, infrastructure expansion, and real estate marginal loosening, the negative factors affecting VIP business have weakened, coupled with the completion of new ports and the improvement of transportation convenience, further promoting the growth of midfield business, it is expected that the total gross gaming revenue will pick up and usher in an inflection point in 2020.