Macao bad, worse to come; No casinos for Brazil

“With the government keeping limitations on individual and group visas into the market and transportation options remaining impaired we believe the Macau market could take five to seven months to start stabilizing and showing improvement,” Stifel Financial analyst Steven Wieczynski says. ‘Impaired’ is putting it nicely. If you’re returning from Macao through infected Guangdong Province, you face a 14-day quarantine upon returning home, which could send Macanese tourism into even more of a tailspin. Also, unless you have a visa predating the February shutdown (since lifted) or a business one, you can’t visit the gambling capital of the world. Visitors from outside China are banned outright.

Playing at a Macanese casino is hardly conducive to a good time. You have to wear a mask and have your temperature taken. Private VIP gambling salons are reputed to be taking a heavy beating. Morgan Stanley analysts reported glumly, “While the casinos are now operational, we believe visitation and play levels will remain depressed for the foreseeable future.” Heavy cancellation of conventions and meetings should hurt Sands China in particular.

Reports the one source, “analysts expect revenues may fall near zero in April.” That’s as a second wave of Coronavirus ravages Macao yet casinos remain open. “This isn’t because gamblers need to gamble, though. It’s because workers need to work,” opines CalvinAyre.com. That’s not speculation, it’s the stated position of Secretary for Economy & Finance Lei Wai Nong. Casinos also have a financial necessity to stay open, since they’ve been redlined from economic relief. Nong is sanguine, expecting April revenues to be just fine. Even without government assistance, casinos will have no trouble staying open, according to a trio of Sanford C. Bernstein analysts, who write, “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.” Galaxy Entertainment has so much cash on hand it could keep running for 40 months without revenue.

JP Morgan boffins were less assured, noting that Macao could see its worst gross gaming revenue month since the Sands Macao opened in 2004. “We wouldn’t be surprised to see Macau printing near-zero GGR until the restrictions at the Guangdong border are lifted.” Bernstein predicts an 87% to 92% drop-off in April. Stock pickers are now looking to 2021—a full year’s postponement—for recovery.

* No quick fix of Internet gambling. That’s the word from Connecticut Gov. Ned Lamont (D) to Mohegan Sun and Foxwoods Resort Casino. Lamont says he lacks the authority to grant ‘Net betting unilaterally. The Southeastern Connecticut Council of Governments has been pressuring Lamont to issue an executive order, saying, “We need to do everything we can to assure that [the casinos] are able to survive now and thrive again in the future.” Replied Lamont, “While I very much share the concerns you express about the financial distress the pandemic is causing our Tribal partners … Authorizing online gaming and enabling consumers to more easily access gambling is a significant policy decision that has not yet been embraced or acted upon by our legislature.” (Sports betting is a moot point, for obvious reasons.) Lamont is deferring the tribes’ slot-revenue obligation to the state and its regulatory assessment while quarantine is in effect.

“We’re careful not to be opportunistic, but we have suggested to the governor that he could allow it temporarily and sunset it until when the pandemic is over and then revisit it,” said Mohegan Sun Chief of Staff Chuck Bunnell, offering a compromise. “We’re not going to come out of this quickly. During the pandemic, from a public safety point of view, it makes sense.” Casino ally state Sen. Cathy Osten (D), however, took a hard line, saying the authorization should be permanent. It would be easy to do, since both casinos maintain online, free-play sites. Very forward-thinking of them.

* Casino legalization, says authoritarian Brazilian President Jair Bolsonaro, is “exclusively up to the executive branch. In fact, it is my sole responsibility to deal with this matter; it is covered by the constitution.” And with that he nixed the prospect of casinos in Brazil. His stated motivation was money laundering but others blame the power of the country’s religious right. “Casinos in my government—this issue is not discussed,” said the strongman. “Twenty, 30, 40 years from now is another story.” Bolsonaro has been flip-flopping back and forth on the legitimization of casinos ever since his presidential candidacy. As late as last week, politicians were discussing the prospect of a Manaus casino, among other ideas.

Losers in this scenario include Las Vegas Sands and Caesars Entertainment, both of which lobbied hard for gambling in Brazil, understandably tempted by the prospect of resorts in Rio de Janeiro. Ditto MGM Resorts International and Hard Rock International. Trying to read Bolsonaro on gaming issues is a difficult proposition: He tried (and failed) to keep lottery houses open during Coronavirus as “essential services.” (!) He’s totally against slot machines yet has left the door open for tourist-only casinos. Confusing much? Bolsonaro seems deaf to the appeals of advocates like Célio Avelino, who said, “If you legalize the casino, you will have tourism development in the region, provide jobs and raise billions of reais per year.” A persuasive argument … except where it really counts.

* Anticipating another extension of Gov. Steve Sisolak‘s statewide quarantine, Wynn Resorts is prolonging employee pay through May 15—two weeks longer than Las Vegas Sands, although Sheldon Adelson has hinted at another fortnight’s relief. Stated Wynn CEO Matt Maddox, “It is our shared responsibility to follow the direction of health and safety professionals to stay home, and limit social contact. We owe it to each other, our families and to our community.” We can think of at least half a dozen careless states that could use that kind of thinking in the governor’s mansion.

No such largesse for Atlantic City, where 16K casino employees are at the mercy of unemployment insurance. Rehirings have been promised when the casinos reopen but, depending on the level of business, some ex-workers may find themselves out in the cold, so to speak. CalvinAyre.com minces fewer words: “This could be a perfect opportunity for casino operators to review their staffing requirements and cut their workforces going forward.” Hard Rock Atlantic City President Joe Lupo has already promised “incredibly difficult decisions made now and in the future.” Ocean Casino Resort has also hinted darkly at cutbacks. Atlantic City can never seem to get out from behind the 8-ball.

* There’s some revisionist history afoot at MGM Resorts International. “While this will undoubtedly have a significant negative effect on our business in the near-term, we are well-positioned to emerge from the current crisis in light of our strong liquidity position and valuable asset portfolio,” remarked CEO Bill Hornbuckle. Valuable assets? Haven’t they sold them all? Wasn’t it just yesterday (metaphorically) that MGM was trumpeting its new, ‘asset-light’ identity?

Jottings: Add Russia‘s pioneering Tigre de Cristal to the ranks of gambling houses that have closed their doors because of Covid-19 … No sports betting Maryland for another two years. Why? A planned referendum didn’t make it through the Lege before the session was truncated …  Buffets are an endangered species. That’s one of five predictions that Scientific Games Senior Vice President Roger Snow makes for a post-coronavirus world … 2027 is the new magic date for MGM to open a casino in Osaka. If we’re lucky this will actually happen during our lifetimes … Frank III and Lorenzo Fertitta are waiving their Station Casinos cash salaries for as long as Covid-19 is rampant. They won’t be paupers, though: They’ll be compensated in equity and will go back on the payroll when their casinos reopen. Still, we applaud their gesture.