Evidence appears to be mounting that the Macau government will extend the territory’s six casino concessions beyond their official expiration in June 2022.
A new report from a trio of Morgan Stanley analysts forecasts an extension of three years, until 2025. That view is seconded in a separate report from a team of analysts with Macquarie Capital.
Neither cited official sources, but an extension has been expected since the onset of the Covid crisis, which made it all but impossible for lawmakers to draft a new gaming law, conduct a public consultation and review the law in the next 18 months.
“With Macau officials focused on the pandemic and economic recovery, odds are increasing that current gaming licenses are extended beyond 2022,” wrote Macquarie’s Edward Engel, Chad Benyon, Jordan Bender and Aaron Lee.
They’re looking for an extension for “two to three years” and suggest this would benefit the government. “Renewing licenses after a full (gaming revenue) recovery would offer policymakers more bargaining power (specifically over non-gaming capital expenditure).”
Or the licenses could be renewed outright, they said, “at favorable terms, including no change in tax rates, manageable concession payments and reasonable non-gaming capital expenditure mandates.”
As Engel noted separately, “If policymakers are averse to a messy and drawn-out ownership battle, then gaming licenses will need to be renewed at generally favorable terms. In fact, regulators’ intentions to re-tender licenses in just six months gives us more conviction that policymakers intend to maintain the status quo.”
The Macquarie report added, however, that this could involve shortening the original 20-year concessions to 10 years to reflect “deteriorating United States-China relations.”
Three of the concession holders have U.S.-based parent companies: MGM China Holdings, Sands China and Wynn Macau.
The government has never spelled out how it would manage rebidding the concessions or how it expects the process would work. All that’s known about current plans is that they call for a new gaming law to replace the original 2002 law, a draft of which, incorporating input from organizations, business leaders and community groups citywide, is supposed to be completed by the fourth quarter of next year and submitted to the Legislative Assembly.
This would give lawmakers less than six months to study and approve the document, a process which alone “could take more than a year,” the Morgan Stanley group of Praveen Choudhary, Gareth Leung and Thomas Allen said.
By law, the government can extend the concessions for up to five years, and SJM Holdings and MGM China Holdings both had theirs extended from 2020 to 2022.
The Morgan Stanley report attributed this to the fact that “necessary preparation for an open bidding process could not be finished before the licenses expired.”
“We believe we are in a similar situation due to Covid-19,” it states.
SJM and MGM China had to pay MOP200 million each for their extension (US$24.7 million), and the Morgan Stanley groups said they believe all six𑁋including Galaxy Entertainment, Wynn Resorts, Sands China and Melco Resorts and Entertainment𑁋will be assessed a like amount this time around.
They said also they expect an announcement on the extensions will be forthcoming by June.
