Rebidding, not renewal
The re-tendering process for Macau’s Big 6 casino concessionaires, which is due to start in 2020, could last a lot longer than the operators expect, says Union Gaming analyst Grant Govertsen.
Govertsen draws a parallel between the license rebidding process for casinos and one for public transportation—to be precise, public bus lines in the world’s top gaming town.
According to Inside Asian Gaming, Govertsen says the delays, extensions and a lack of transparency surrounding the bus negotiations is “the best example of how gaming concessions will be handled.” Officials in Macau were still haggling with the city’s three public bus concessions less than two weeks before they due to expire at the end of July.
“This reinforces our view on the gaming concessions,” said Govertsen. “Ultimately, we expect SJM and MGM to be extended (from their 2020 expiration date) until June 2022. At the same time, we do not expect any material progress to be made on how gaming concessions are handled until the next administration takes office (effectively January 2020), at which point we would expect a multi-year study to take place (potentially taking a wait-and-see approach to Japan operations) and thus necessitating concession extensions for all six perhaps well beyond 2022.”
He added that, “based on the significant amount of on-the-ground jockeying for position already occurring by various service provider casino operators (and others),” there is at least a 50-50 chance that the government will award a seventh concession, and possibly an eighth.
“In a nutshell, the likelihood of the process dragging on until the middle of the next decade gives the Macau Big 6 some breathing room and pushes out concession risk further than currently baked into shares.”
Secretary for Economy and Finance Lionel Leung confirmed that the licenses will be rebid rather than renewed, and related regulation must be “revised and improved.”
One of the Big 6, SJM Holdings Ltd., wants to see all the gaming licenses expire in 2022 by extending the ones due to expire in 2020. Ambrose So Shu Fai, SJM’s executive director and CEO, said it would make for a more “reasonable“ process; not coincidentally, along with MGM China Holdings Ltd., SJM holds one of the licenses set to expire in the first round, in 2020.
The other four—Wynn Macau, Sands China, Melco Resorts & Entertainment, and Galaxy Entertainment Group, are due to expire in 2022.
So added that SJM is hastening to complete its new Grand Lisboa Palace in the city’s Cotai district. “Obviously, we hope we can complete the construction of all buildings within this year and to apply for the necessary government licenses for the operation in 2019,” he said. “Our objective remains the same.”
Also from Union Gaming is a report that suggests a recent surge in construction from gaming companies could be a play for that seventh or eighth gaming license. According to Asia Gaming Brief, the brokerage said several projects “are likely to be used as leverage as it relates to the issuance of” additional licenses.
One project, said to be owned by a large Southeast Asian gaming operator, is building near Wynn Macau and the Grand Lisboa site. Another could be the planned two-star hotel near Grand Lisboa from the Golden Dragon Group, which already owns or operates four smaller casinos in Macau. Other activity includes the development of Galaxy Macau Phases III and IV, which are set to open in stages from late 2019.
