Fitch Ratings reports on Asia-Pacific casino recovery

By Noah Taylor Updated
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The casino gaming sector will improve in 2021 after the impacts of the coronavirus pandemic, according to a new report from Fitch Ratings.

GGR Asia reports the analysts said gaming markets more reliant on local visitation will continue to recover faster, adding that any effects of the on-off closures due to local virus infections were likely to be “less active in 2021”.

Availability of vaccines would “allow destination markets like Singapore and Las Vegas to begin recovering more in earnest in second half 2021,” the ratings paper said.

The credit assessment institution also noted that cost cutting by casinos had meant that the impacts of the pandemic had been offset by healthy balance sheets.

Fitch Ratings said it maintained a negative outlook for a majority of its “rated gaming universe” because of the pandemic’s severe impact to casino operators and uncertainty regarding the sector’s recovery trajectory.

Discussing jurisdictions in the Asia-Pacific, Fitch noted that for the Macau casino market, although the city had an almost universal quarantine-free travel bubble with mainland China, current continued travel restrictions between Hong Kong and Macau were a “headwind”.

The institution said it was forecasting monthly revenue declines of 50 per cent to 60 per cent, year-on-year, through the first half of 2021, with accelerating growth in the second half, “led primarily by the premium mass segment.”

Fitch Ratings noted: “The eventual easing of travel to Hong Kong and potential availability of a vaccine drives our assumption for a strong second half 2021 performance relative to first half 2021.”

The financial institution observed that while Macau’s current six gaming licences expire in June 2022, the city’s chief executive Ho Iat Seng had a “multi-year extension option” in relation to the current rights.

“Fitch continues to believe the concession rebid process will be pragmatic,” said the credit rating agency, referring to an anticipated new public tender associated with the expiry of the current Macau gaming rights.

Malaysia poised to rebound quicker than Singapore and Macau

Fitch Ratings expects casino revenues in Malaysia, where Genting Malaysia runs the country’s only licensed gaming complex, Resorts World Genting, near the capital Kuala Lumpur, to recover gradually to 75 per cent 2019 levels in 2021, “aided by new attractions”, understood to be a reference to a long-awaited new outdoor theme park and the country’s larger and domestic focused market relative to neighbouring Singapore.

Singapore’s casino duopoly, involving respectively Resorts World Sentosa, run by Genting Singapore and Marina Bay Sands, run by a unit of United States-based Vegas Sands Corp, that pre-pandemic had been able to attract many overseas customers.

Fitch Ratings expects Singapore’s 2021 gaming revenues to reach only 45 per cent of 2019’s levels.

Singapore’s tourism boss said in August that it was inevitable there would be delays to the expansion of the state’s two casino resorts due to disruption to the construction sector wrought by the pandemic.

The Japanese government’s aspiration to introduce casino complexes as a form of economic stimulus has been noted by Fitch, although the process remains protracted.

“Japan’s IR plans appear increasingly uncertain as the pandemic exacerbates existing challenges, such as a high gaming tax rate, bureaucratic and regulatory hurdles and a bribery scandal,” Fitch said.

The financial institution noted that during 2020, Las Vegas Sands, which also operates some Macau casinos, had abandoned its plans to compete for an integrated resort licence in Japan.

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