[ET Net News Agency, 27 March 2020] COVID-19 is putting a severe strain on the
Asia-Pacific gaming industry, according to a report that S&P Global Ratings published
today, titled "Asia-Pacific Gaming Takes Severe Knock From COVID-19."
"We estimate that visits to casinos will drop 60%-80% in the first half of 2020 as
governments close venues and restrict traffic flow across and within borders, exacerbating
weak consumer sentiment," said S&P's credit analyst Sandy Lim. "Gaming equipment makers
and lottery/betting operators are experiencing similar pain, given the temporary closure
of many venues."
According to the report, it's inevitable that balance sheets will deteriorate for all
operators this year, and some companies may breach our downgrade triggers. S&P expects
profitability to fall faster than revenue for casino operators because of: (1) their
minimum operating expenses; and (2) a faster decline in higher-margin mass-market than for
the "VIP" (or high-roller) segment.
A recovery should be gradual since consumer sentiment will likely remain weak even after
the virus is contained. Even if the virus is largely contained by June 2020, the revenue
decline will continue into the third quarter at a milder pace, before flattening out in
the fourth quarter.
"Some cash could be lost forever. And this comes at a time when various operators in
Asia-Pacific are entering a heightened period of capital expenditure," said Lim.
S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread
and peak of the coronavirus outbreak. Some government authorities estimate the pandemic
will peak about midyear, and the agency is using this assumption in assessing the economic
and credit implications.
S&P believes the measures adopted to contain COVID-19 have pushed the global economy
into recession. (KL)