Concessions will expire starting in 2020
Wilfred Wong, president and chief operating officer for Sands China Ltd., says he and other gaming operators in Macau are anxious for details about possible renewals of the city’s existing six gaming concessions.
Sands China and its rivals in the market—Wynn Resorts, MGM Resorts International, Galaxy Entertainment Group, Melco Resorts & Entertainment and SJM Holdings—all will see their gaming concessions expire in the years between 2020 and 2022.
Speaking on the sidelines of an event at the University of Macau, Wong said the government’s plans are still under close wrap. “I think every one of us is eagerly waiting for the government to announce the details. We have been told that the government itself has its own timetable, but they are not telling us exactly when.”
According to GGRAsia, last year Macau Chief Executive Fernando Chui said mid-2018 would be an “appropriate” time to provide more details regarding any extension of gaming rights for the current gaming concessionaires.
Meanwhile, Wong said, Sands China has heeded the local government’s mandate to expand its resorts beyond gaming. “We are doing everything that the government really asked us to do; more non-gaming facilities, more investment in MICE. We are doing every step according to what the government wants.”
Ambrose So, CEO of SJM Holdings, said last month that the industry would like “clarity” from the authorities about the upcoming concessions.
The local government has commissioned two studies on the evolution of the city’s gaming sector from 2020 to 2030, giving a special look at the right number of casino licenses. According to Macau gaming law, the licenses of existing concessionaires can be extended for up to five years from their original expiration dates. But once a contract expires, any new concession would have to be granted via public tender.
In related news, Bloomberg analyst Margaret Huang advises investors in the market to beware of risks that can lead to share volatility, such as an undue increase in the VIP market. The precipitous drop in gaming revenue that lasted from mid-2014 to mid-2016 was caused by a crackdown on corruption and money laundering by the central government that sent VIP players scurrying. Now they’re back in force, with VIP GGR for 2017 up 26.6 percent yearly.
“That anti-extravagance and anti-corruption feeling has started to fade and you start seeing wealthy gamblers coming back and having a good time with so many amenities catering to them,” Huang told the Macau News Agency. “With that growth obviously comes risks. You’re talking about a market where one player can swing results. As an investor you really have to be aware of that.”
For a more stable market, Huang said, it’s vital to cater to both mass and VIP segments. “Every time results come out, stocks will bounce around. That’s what I mean by volatility risk. Inherently there is a positive solid demand coming to the market; you just need to be ready to ride it through,” she added.
Bernstein analysts, meanwhile, predict GGR for the first quarter of 2018 will grow 18 percent year-on-year, driven by stronger growth in VIP, reported Asia Gaming Brief. But mass should continue to show robust growth, the brokerage predicted.
For full-year 2018, Bernstein has raised its estimated GGR growth to 11 percent with mass growing by 12 percent and VIP growing 9.5 percent. Industry EBITDA growth has been revised to 13 percent, up from 10 percent.Bernstein’s top picks in the sector include Melco Resorts and Wynn Macau.
