The coronavirus pandemic is presenting the Asia-Pacific casino industry with gale force headwinds as earnings before interest, taxes, depreciation and amortization (EBTIDA) in the region could slide as much 70 percent this year, according to Moody’s Investors Service.
Citing declining international travel, property closures and ongoing social distancing measures, the research firm says earnings in marquee gaming markets in the region, including Macau and Singapore, will be depressed in 2020 before a modest rebound next year. Moody’s rates the credit profiles of nine gaming firms with Asia-Pacific footprints, including Las Vegas Sands (NYSE:LVS), MGM Resorts International (NYSE:MGM), Melco Resorts & Entertainment (NASDAQ:MLCO) and Wynn Resorts (NASDAQ:WYNN).
We assume the earnings recovery will start in the second half of 2020, following a very weak first half,” said the ratings agency. “Still, earnings in 2021 will be lower than in previous years. Downside risks to our forecasts are significant, particularly if the pandemic is not contained and lockdowns have to be reinstated.”
Earlier this year, officials in Macau, the world’s largest gaming center, ordered a 15-day closure of integrated resorts. Other Asia-Pacific nations with casinos followed suit. In Singapore, Marina Bay Sands and Resorts World Sentosa, the city-state’s two gaming venues, are only partially reopened and the casinos at those hotels remain closed.
Restrictions Galore
Over the first half of this year, all of the APAC gaming markets tracked by Moody’s, including Australia, Macau, Malaysia and Singapore, implemented various travel restrictions and casino shutdowns. Many of those protocols remain in place, stifling hopes of a near-term recovery for the tourist-dependent industry.
“The ensuing decline in tourism culminated in the suspension of gaming operations as governments implemented measures to contain the spread of the coronavirus,” said Moody’s. “Slower economic growth will also hurt revenue. The highly discretionary and nonessential nature of consumer spending on casino gaming makes the sector extremely vulnerable to changes in regional and domestic economic conditions.”
Adding to the pressure on APAC operators is the specter of a second wave of COVID-19 cases. China, the world’s second-largest economy and a major source of gamblers for casinos in Australia, Macau and Singapore, reported nearly 300 new cases since June 11 in the capital city of Beijing,
The country’s death toll is 4,634 and unchanged since the middle of last month, but a resurgence in case counts could force policymakers to extend punitive travel controls and cumbersome quarantine policies.
Rough Outlooks
Following the coronavirus outbreak, Fitch Ratings, Moody’s and Standard & Poor’s (S&P) – the three major credit agencies – are active in lowering ratings and outlooks on gaming companies.
Moody’s rates nine Asia-Pacific operators and has “negative” outlooks on all nine. That means bond grades, many of which already in junk territory, are susceptible to downgrades.
Those glum views “reflect the uncertainties around the reopening of casino properties and the pace at which operating performance will recover,” said the research firm.
With an A3 credit rating, Genting Singapore is the highest-rated issuer of the nine covered by Moody’s. At Baa3, Las Vegas is has the top mark among US-based gaming firms with Asia-Pacific operations.
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