The author is an analyst of NH Investment & Securities. She can be reached at firstname.lastname@example.org. -- Ed.
Foreigner-only casino sales continued to rise in February, despite decreased visitor numbers due to Covid-19. In the case of Paradise, the loss of high rollers was limited, while at GKL, hold ratio improved thanks to long-term stays by VIPs. Similar trends are expected in March.
February review: Despite external negatives, sales continue to climb
In February, declines in visitor numbers and drop amount were inevitable at foreigner-only casinos. Inbound tourists slid due to reduced air travel following the outbreak of Covid-19. Also, efforts were made to restrict visitor numbers in some locations owing to the virus outbreak. Base effect was also in play given the timing of the Lunar New Year (February in 2019 → January in 2020).
Paradise: The firm registered February sales of W64.3bn (+16.2% y-y), drop amount of W494bn (-0.1% y-y), and a hold ratio of 11.0% (+0.5%p y-y). Thanks to the limited loss of high-roller VIPs (especially among Chinese VIPs), the decrease in drop amount was insignificant versus the drop in VIP visitor numbers. This trend is confirmed by Chinese VIPs’ drop amount, which was 176.4% higher than the recent three-month average. With regard to hold ratio, while a smaller portion of mass drop amount was disadvantageous, some high-roller VIPs prolonged their stays after the Lunar New Year holiday.
GKL: Despite a decline in drop amount to W284.3bn (-20.4% y-y), the firm booked February sales of W44bn (+38.1% y-y) thanks to a significant hike in hold ratio (15.5%; +6.6%p y-y). Although visitor numbers and drop amount fell due to limitations on side bets and visitor numbers, sales rose on: 1) long-term VIP stays; 2) increased promotion efficiency; and 3) improved hold ratio thanks to luck-factor over VIPs. However, given that the decrease in drop amount was severe compared to the fall in VIP visitor numbers, we believe that the number of high-roller VIP visitors from major countries (China and Japan) declined.
Impact of Covid-19 to sustain in March; sentiment to improve once outbreak subsides
We believe that Covid-19 will continue to impact casino players in March. Since mid-February, the effect of Covid-19 has increased sharply. Thus, March drop amount and visitor numbers are likely to fall m-m. Moreover, a turnaround in sentiment appears some way off. Although some Macau casinos have reopened, large casinos are likely to remain closed until after Mar 20, as Covid-19 continues to spread across the globe. That said, once the crisis subsides, pent-up demand should lead to a strong rebound.
NH Investment & Securities