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Macau's casinos have been trying to recover for the past few years, but the restrictions have prevented venues from reaching pre-COVID levels. Now a new outbreak will test the limits of casinos, which could cause liquidity problems and a need for funding.

COVID-19 outbreak

Over the weekend, Macau health officials announced 12 COVID-19 cases in the region. Since then, there have been a total of 31 confirmed cases. Game analysts believe the already struggling casino industry will be significantly affected by the news. SAR's gross gaming revenue (GGR) is expected to be close to zero.

JPMorgan's DS Kim and Livy Liu say the casino is now operational, but it's no surprise that the GGR has reached near zero for weeks. If that happens, the inbound visit rate will be minimal.

Analysts say Macau's finance minister says casinos will not be closed, and visits will be in full swing. Visits to Macau will be severely restricted because of the virus, and maybe blocked because of the virus. Depending on how long the outbreak lasts and to that extent, revenue will be significantly reduced for a week or more.

liquidity problem

Liquidity will be a concern for casino operators who don't generate revenue. Officials just said game facility operators must own a net worth of $5 billion ($625 million) to win new concessions and maintain them during the re-bid process at the end of 2022.

During the bidding process and if approved by the operator, the amount will have to be maintained in cash before the new concession is made. It is necessary to hold cash separately from the cash held by the concessionary.

Analysts say Sands and SJM have the shortest liquidity available for funds until March 2023. Other operators, such as Melco, Wynn and MGM, have enough liquidity to overcome the COVID-19 outbreak with up to two years of liquidity. Galaxy can last much longer with about five years of liquidity.

While some will feel the pressure on liquidity, all operators are expected to be able to withstand new outbreaks.