Analysts recommend wait-and-see attitude
News that the Chinese government are removing ATM cash machines from inside casinos has some Macau gaming operators concerned about a renewed crackdown on capital outflows, which could also affect their businesses. ATMs, a known source of ready cash for casual gamblers, have been targeted in the past by Beijing, which wants to keep a lid on money leaving the country.
Casino shares declined for several days in a row last week on the news, reported Bloomberg News. That got the attention of investors looking for a few bargains. JPMorgan Chase & Co. analyst DS Kim wrote that “investors may want to wait and see how the situation pans out” before placing their orders.
Macau authorities in conjunction with Chinese banks began removing the China UnionPay point-of-sale terminals from pawn shops and jewelry stores at properties owned by Sands China, Melco Resorts & Entertainment and Galaxy Entertainment. Wynn Resorts and MGM China do not have those shops.
Bernstein Research said the move affected properties on Cotai, but not those on the peninsula, reports Asia Gaming Brief. The firm said authorities may be removing the terminals in order to upgrade them, adding facial recognition and other advanced know-your-customer technologies. Bernstein conceded that the move was “odd” because it was taken without advance notice or explanation.
“The recent actions in Macau may be part of the broader China government strategy,” Bernstein pointed out. “If the government broadens the effort to reduce outflows through Macau by further limiting Union Pay capabilities and/or going after underground baking channels, the headwind to Macau GGR would be more negatively impacted than currently contemplated.”
Inside Asian Gaming, meanwhile, reports that credit ratings agency Moody’s Investors Service has given Macau a strong “Aa3 stable” rating, a tribute to its fiscal health, the absence of government debt and large capital reserves.
In a news release, Moody’s said the stable outlook also reflected Macau’s prospects for more resilient growth ahead while the city’s large financial buffers provided protection against any “sudden external shocks.”
“Such shocks would likely stem from economic, financial and policy developments in China,” the company said.
Moody’s warned that Macau “remains susceptible to potential policy measures in China. For example, a further tightening of China’s anti-corruption crackdown and/or the introduction of gambling on the mainland would weaken gaming and tourism in Macau. As a small, open and concentrated economy, Macau’s GDP growth will remain volatile.” But it also expects Macau’s recovery to continue through 2020 or 2021, just as the city weighs the renewals of the current gaming concessions.
Meanwhile, Macau businessman David Chow Kam Fai, co-chairman of Macau Legend Development and a former member of the legislative assembly, is urging the government to add two additional concessions to the current six: SJM, Wynn, Galaxy, Sands, MGM and Melco.
In the run-up to the concession renewals, Sands China continues to invest in its properties in Macau, including the US$700 million rebranding of the Sands Cotai Central property as the Londoner Macao.
Sands China President and COO Rob Goldstein said no market in Asia “competes or compares to the strength of Macau,” despite the recent two-year downturn and new concerns about a government crackdown.
“I believe Macau, today, is probably too far ahead for any other place to replicate,” he said.
In an interview with CNBC, Melco Chairman and CEO Lawrence Ho called Macau “the greatest gaming and entertainment jurisdiction.”
Fitch ratings agency said its positive view on Macau “is supported by an expanding middle class in China and infrastructure development in and around Macau.”
