Bernstein analysts Vitaly Umansky and Shirley Yang don’t expect a unit of Genting Malaysia Bhd to win an “outright” gaming concession in Macau in the unfolding retender process.
They said the company may instead be “positioning itself to be a prospective rescuer” if an incumbent operator “experiences financial difficulties and may require a partner.” The current Big 6, which all have applied for new concessions, are Wynn Macau, Sands China, MGM China, SJM Holdings, Melco Resorts and Entertainment and Galaxy Entertainment Group.
On September 13, Genting made a surprise bid for one of six available licenses through its GMM Ltd. unit. On September 16, after formally opening all submissions to the tender, Macau officials said proposals by the six incumbent operators had been accepted unconditionally, but that the acceptance of GMM’s was “conditional.” The government did not elaborate, reported GGRAsia.
“We believe Genting is positioning itself as a prospective partner or buyer of an existing operator in the event that a concession-holder experiences financial difficulties and may require a partner or could be open to being acquired, with government consent,” wrote the Bernstein analysts.
Due to the effects of the Covid-19 pandemic and China’s strict zero-Covid policy, the current six operators have been burning cash to pay the bills.
In a September 19 note, Umansky and Yang wrote that daily gross gaming revenue (GGR) for the previous week “dropped post the Mid-Autumn Festival,” a Chinese holiday, at only MOP75 million (US$9.3 million), down 20 percent week-on-week compared to the MOP94 million average daily rate from September 5 to 12.
“Near-term GGR recovery will remain tepid as the Chinese government continues strict travel policies for long-distance travelers,” according to the note. They added that “commentary in Macau and (the) financial press” puts Wynn at greatest risk of being nudged aside by Genting. They disagreed, and said SJM has “the most issues.”
In Genting’s favor is its “good relationship with Chinese authorities,” and its non-gaming experience at other properties, including Resorts World Genting in Malaysia and Resorts World Sentosa in Singapore. Genting also operates resorts in New York and Las Vegas, as well as the U.K., Egypt and the Bahamas.
With another view, S&P Global Ratings says a win by Genting could “cloud” its own recovery. According to Inside Asian Gaming, such a move “could shift the group’s focus to debt-funded growth from deleveraging, if it gets the gaming concession.
“This is contrary to our earlier expectation that Genting Bhd’s credit quality will stabilize following the completion of a major investment cycle while an operational recovery is underway.
“Despite offering a wider geographic footprint and an opportunity for the group to expand, Macau’s gaming market would also imply more intense competition in a highly regulated and scrutinized market versus other markets, such as Malaysia and Singapore.”
Maybank IB analyst Samuel Yin also weighed in, saying, “We are lukewarm on this development as China’s zero-Covid policy has hit Macau hard relative to Genting Malaysia’s existing operations in Malaysia and the west.
“That said, our view may change drastically for the better should China lift its zero-Covid policy. In any case, it is early days yet.”
And investment bank Nomura wrote that Genting Malaysia investors may not cheer at the prospect of the company entering Macau while it’s still recovering from the effects of the pandemic.
