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Social distancing is one of the major non-pharmaceutical cures for the coronavirus pandemic. Community transmission of the virus is quite dangerous for an economy as it raises the paramount risks of complete lockdown, thereby hurting demand and supply concurrently.
Entertainment and leisure industry has been hit hard by the coronavirus outcomes. Since Chinese tourists were banned by Australia when coronavirus was making way into new countries, the impact on casino businesses might have started right there.
Casino companies, which largely includes, hotel businesses have been the foremost casualty, and it could be the case that many of such companies would not make to the other side of the dreadful pandemic.
Some casino companies through their digital offerings also enable the customers to bet on global games, including National Basketball Association, English Premier League, A-League, Champions League etc. – all of these leagues are on a halt, which adds more shocks to such companies.
However, the above assumptions could be limited to companies having lacklustre management, less-effective plans, absence of crisis management, less-diversified revenue streams, stressed cash flow position, large debt maturities in the near-term etc. Moreover, small businesses – considering that COVID-19 implications would not to be long lasting.
Nonetheless, the policymakers, specifically in Australia, have been taking unprecedented actions amid such unprecedented times to protect small businesses going out of order, thereby saving the economy’s majority businesses – as ~93% of businesses in Australia had a turnover of less than $10 million in 2018-19, according to Australian Bureau of Statistics.
Earlier, prior to broad-based sell-offs, we had noted that the volatility could be expected by the investors as uncertainty levels were skyrocketing. However, now could be the time when we should emphasise on the positives as much of the wealth has been lost across markets.
Chinese are coming back online gradually, meaning that the supply is coming back as well as demand, thereby inducing tailwinds for Australian producers that supply or import from China.
If Australia’s capacity is not compromised, we could be in an initial phase of recovery given that China has major stakes in trade with us. With low oil-prices in play – possibly leading to deflationary pressures – the real interest rates could have room to run up higher at the backdrop of safe-haven assets witnessing outflows.
When real interest rates are marching higher – households could have more capacity to spend – in fact, Chinese households have to do so much shopping since the country had witnessed a severe lockdown at a time of Lunar New Year, which is like Christmas in China.
We shall, however, also note that the World Health Organisation (WHO) has taken a promising step in an effort to cure the fast-spreading pandemic, especially in the highly- connected European region.
Being labelled as ‘SOLIDARITY trial’ by WHO, the trial aims to conduct clinical trials on the patients exposed to the virus. The organisation is going to work with its partners and organise a study, which would compare untested treatments that are running across several countries. As a result, the study would enable the authorities to determine the efficacy levels of the treatments being applied by several nations.
On 20 March 2020 (9:42 PM AEDT), Johns Hopkins CSSE shows around 81.2k confirmed cases in China, out of which 71.26k have been recovered and the death toll stands at 3.25k. It is evident that the situation in China is increasingly getting better, with a significant number of people recovered.
China’s experience with the pandemic is time-tested when compared to other countries, and the country is showing a generous attitude in collaboration with other nations to fight the pandemic.
Insight from the Chinese healthcare professionals would be extremely beneficial for the other countries, and they have arrived in Italy to fight the massive damage in the country. China has supplied necessary healthcare equipment and infrastructure to help other countries cure the fast spreading disease, including Italy, Philippines, Spain, Iran, Iraq, France, Cambodia etc.
Aristocrat Leisure Limited (ASX:ALL)
Recently, the company withdrew its guidance for the fiscal year 2020. It was noted that there is continued uncertainty in relation to the duration of the pandemic, which had induced the management to undertake this decision.
ALL notes that, in global land-based market, the customers are closing venues and capital investment decisions are being optimised, which is leading to softer demand for the company, but the online bookings were insulated to date.
Aristocrat said that it has been tracking the developments led by COVID-19 for several months now, and the company is undertaking risk-mitigating strategies for short-term as well as long-term. It is the firm’ intention to bounce back as quickly as possible.
It also added, the business has solid fundamentals that are supporting the long-term vision and strategy of the management. ALL had net-debt to EBITDA at 1.4x (30 September 2019) and the term loan facility is due in October 2024, providing financial headroom.
ALL has diversified operations. During FY2019, its digital revenues accounted 40% of the total while 30% of total revenue was derived from land based gaming operations and outright sales.
Also, the operations of the business are diversified across markets, having a range of products/services than ever before.
On 20 March 2020, ALL last traded at $17.54, down by 2.556% from the previous close.
Crown Resorts Limited (ASX:CWN)
In March, the company has announced that numerous measures to limit the community transmission of COVID-19. It has announced a number of policies to tackle the issue as an entertainment and leisure business, below are the measures.
- Every second gaming machine and the electronic table has been taken down.
- There would be appropriate distancing between players with no standing players.
- Stand-up table game would only host five players.
- Patrons engaged in individual food & beverage, banqueting and conference facilities to 100 persons
All these measures have been incorporated in Crown Melbourne, Crown Perth. In February, the company disclosed its half-year results. It was noted that the business had witnessed softer trading conditions as a result of travel bans, especially during the Chinese Lunar New Year period.
On 20 March 2020, CWN last traded at $6.12, rising by 2% from the previous close.
