News Alert: Macau gaming sector updates on license re-tendering

  • Macau government released updates on its gaming concession
  • New regulations confirmed so far came largely in line with market expectations
  • No government rep to be appointed to the Board of Directors of casino operators, a slight positive surprise. Maintain BUY on Galaxy, SJM and Sands China 

What’s New?

The Macau government just held a press conference to disclose some updates on the new gaming licenses, during which the Secretary of Administration and Justice (Cheong Weng Chon), as well as Chief of Staff (Ku Mei Leng) and the Advisor (Ian I Lin) of the Office of the Secretary for Economy and Finance attended the meeting and confirmed the following:

  • The re-tendering of casino concessions to be capped at six new licenses with a term of 10 years (with possible extension of three years under exceptional circumstances)
  • A new tender process will be introduced for all existing and potential concessionaires
  • The existing sub-concession arrangements will be discontinued 
  • The minimum capital required for new gaming concessionaires will be MOP$5bn (previously: MOP$200m)
  • Tendering companies will need a Macau-based Managing Director holding at least 15% stake (previously: 10%) of the company
  • The proposal to appoint a government representative to the board of Directors of each gaming concessionaire will NOT be implemented
  • There will also be NO change in the existing direct gaming tax of 35% 
  • The Executive Council has already concluded discussion on amendments to Macau’s gaming law 16/2001, and the new framework will be sent to the Legislative Assembly for consideration on 15 Jan 2022 (i.e. tomorrow)
  • The current gaming licenses will be extended for only a short term (no specific time period mentioned) if the re-tendering process cannot be completed in time of the expiry by 26 Jun 2022 

Our Views:

So far, the framework for re-tendering of casino concessions came largely in line with expectations, perhaps except for the abolishment of earlier proposal to appoint government representative to sit on the Board of Directors of licensed companies and this could be welcomed by casino operators. While we stay positive on the medium-term outlook of the Macau gaming industry and continue to like Galaxy (27.HK, BUY, TP: HK$ 63.36), SJM (880.HK, BUY, TP: HK$11.20), and Sands China (1928.HK, BUY, TP: HK$39.75), we await more details on the re-tendering requirement and process. Latest tightening of borders between Macau and Zhuhai amid COVID-19 resurgence in various regions of Mainland China could cast short-term impacts on visitor arrivals and gross gaming revenue (GGR), especially given the impending peak season of Chinese New Year Holidays. Having said that, we remain optimistic on the sector given a 12-month investment horizon.