SINGAPORE: The Covid-19 pandemic is putting a severe strain on the Asia-Pacific gaming industry, according to S&P Global Ratings in its latest report titled “Asia-Pacific Gaming Takes Severe Knock From Covid-19.”
“We estimate that visits to casinos will drop by 60-80% in the first half of 2020 as governments close venues and restrict traffic flow across and within borders, exacerbating weak consumer sentiment.
“Gaming equipment makers and lottery/betting operators are experiencing similar pains, given the temporary closure of many venues,” said S&P Global Ratings credit analyst Sandy Lim
According to the report, it is inevitable that the balance sheets will deteriorate for all operators this year, and some companies may breach S&P’s downgrade triggers.
The report expects profitability to fall faster than revenue for casino operators because of their minimum operating expenses, and a faster decline in higher-margin mass market for the “VIP” or high-roller segment.
A recovery should be gradual since consumer sentiments will likely remain weak even after the virus is contained, said the rating agency.
Assuming the virus is largely contained by June, the revenue decline will continue into the third quarter — albeit at a milder pace — before flattening out in the fourth quarter, it said.
“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,” Lim said.
S&P Global Ratings acknowledged a high degree of uncertainty regarding the rate of spread and peak of the Covid-19 pandemic.
Some government authorities estimate that the pandemic will peak by about mid-year, and are assessing the economic and credit implications based on this assumption. — March 27, 2020, Bernama
