Casino company earnings and cash flow should improve over the next 12 to 18 months as visitor numbers continue to recover post pandemic, particularly in Macau, says a Monday report from Moody’s Ratings.

But the institution says the outlook is less clear for other Asian-region casino jurisdictions due to reports of the Chinese government encouraging mainland residents not to gamble overseas.

Moody’s observes however that the Resorts World Sentosa and Marina Bay Sands casino duopoly in Singapore, and the monopoly in Malaysia at Resorts World Genting, will probably face lower risk from such a factor than other places in Southeast Asia, including Cambodia. That, it says, is because of Singapore’s proportionately more modest exposure to Chinese tourism, and the fact its casino resorts have plenty of non-gaming attractions.

The report authors stated: “We expect full-year gross gaming revenue (GGR) in Macau to reach 75 percent to 80 percent of pre-pandemic levels in 2019 over 2024 and 2025, compared with 63 percent in 2023 and 14 percent in 2022.”

They added regarding Macau, the only place in China to have legal casino gaming: “The pace at which revenue improves will slow compared with the surge in 2023 after China ended pandemic border restrictions.”

The 2024 improvement would be “despite slower economic growth in China this year than last year”.

Moody’s noted that in first quarter 2024, Macau GGR was 75 percent of 2019 levels and tourist arrivals to the city increased by 79 percent year-on-year.

The institution said that in the first three months this year, GGR from the mass-market segment was 110 percent of 2019 levels.

“We expect this figure will increase to 115 percent by 2025, with premium mass-market customers driving the growth.

“In contrast, we expect strict regulations for junket operators to continue to curtail growth” in Macau’s VIP gaming market, said the Moody’s paper.

Risks, lower leverage

For Southeast Asia however, a “potential risk” to recovery rate for tourism and casino revenue was that “according to media reports, Chinese embassies have warned citizens against gambling overseas”.

But Moody’s added: “In a worst-case scenario where Chinese tourist numbers decline significantly, the gaming sectors in Singapore and Malaysia will be less exposed than the Cambodian market.

“Gaming operators in Singapore and Malaysia are less dependent on Chinese tourists than those in Cambodia and they have significant non-gaming operations, including theme parks and retail.”

Moody’s stated that while in 2023, revenue for Genting group’s operations in Singapore and Malaysia reached 97 percent and 91 percent of 2019 levels respectively, overall tourist arrivals from China were less than 50 percent of 2019 levels in Singapore and Malaysia.

But for NagaCorp Ltd, which runs the NagaWorld complex, a casino monopoly in the Cambodian capital Phnom Penh, revenue “remains well below 2019 levels,” said Moody’s.

“NagaCorp derived around 60 percent of its revenue from the referral VIP segment before the pandemic, and its collaboration with junket operators resulted in a high proportion of VIP players from greater China,” noted the rating agency.

The institution observed that while “tourists from China will likely return over time,” it does “not expect a significant recovery in the referral VIP gaming segment because of China’s strict regulation of junket operators”.

Moody’s expect NagaCorp’s revenue to “recover gradually” over the next two years to between “35 percent and 41 percent of 2019 levels”.

The casino firm’s earnings before interest, taxation, depreciation and amortisation (EBITDA) however “will recover more strongly” to between 48 percent and 55 percent of 2019 levels, suggested the institution.

It stated: “This is because of the greater contribution from NagaCorp’s mass market and premium VIP segments, which have much higher margins than the referral VIP market.”

Moody’s outlined that as earnings and cash flow “continue to improve”, gaming operators in Macau and Southeast Asia “will be able to pay down more of the pandemic-era debt they built up between 2019 and 2022″.