The market does not know “how many” U.S. gaming companies might be welcome in Macau beyond the year 2022, when the final four of the city’s current six gaming concessions are due to expire, says a Thursday note from Telsey Advisory Group LLC.
The context of the note was the possible breaking up – by sale of some component parts – of the U.S.-based casino group Wynn Resorts Ltd in the wake of the departure of its founder Steve Wynn over allegations – denied by him – of sexual misconduct. The group is the parent of Macau gaming operator Wynn Macau Ltd.
Were the Macau operation somehow to be separated from the parent, there would be “more than enough” suitors for the former, suggested Telsey’s analyst Brian McGill.
“The issue is that you don’t know what the [Macau] government thinks in terms of the concession and how many U.S. companies are wanted in Macau past 2022,” he wrote.
“The Chinese [central] government would need to sign off on the buyer and we think the most likely buyer is likely to be a Chinese firm. We also think the Chinese would have a say over the price,” Mr McGill suggested.
Macau-based casino operator Galaxy Entertainment Group Ltd acquired last month an approximately 5-percent stake in Wynn Resorts, for a total consideration of US$927.5 million. Investment analysts have suggested that the sale of new Wynn Resorts shares to Galaxy Entertainment, founded by Hong Kong billionaire Lui Che Woo, positions the latter company as a potential suitor for the Wynn Resorts business.
Wynn Macau Ltd had a market capitalisation of nearly HKD159 billion (US$20.3 billion) as of Friday, according to Bloomberg data. Were the company to be actively in play for a takeover, it could push up the price of its shares, several industry sources have told GGRAsia.
Set against that, is the present lack of clarity regarding the issue of whether the six current operators will get refreshment of their Macau rights when the current ones expire in either the year 2020 or 2022, and what say if any the Chinese authorities would want in a transaction.
Wynn Palace, Wynn Macau Ltd’s Cotai resort which opened in August 2016, cost circa US$4.6 billion to build, and was constructed on public land made available under a land concession contract with a set expiry date. In the case of some of those Macau operators that also have built on public land concessions, the land agreement expires at a later date than the gaming concession they hold.
On April 13, Japanese brokerage Nomura said that a possible sell-off by Wynn Resorts of its under-construction Boston Harbor resort in Massachusetts in the U.S., might actually help the group with the Macau authorities and remove a distraction for the parent in its domestic market.
Telsey’s Mr McGill stated in his Thursday note: “The gaming regulators in most of these [Northeastern U.S.] states like to grandstand on all sorts of issues that really don’t concern the overall casinos in the state.”
He added: “At the end of the day, it means little to the company whether they open Boston or sell it. Given what has taken place, it might make more sense to sell it and not deal with the headaches that Massachusetts is likely to present.”
In other notes issued on Thursday, Deutsche Bank Securities Inc said it expected Wynn Resorts to deliver “solid” first-quarter 2018 results, when it reports on April 24.
This would indicate “continued momentum in Macau and continued mass traction at Wynn Palace,” said analysts Carlo Santarelli and Danny Valoy.
Nomura said in a Thursday note that it was raising its full-year 2018 casino gross gaming revenue (GGR) estimates for Macau market-wide, by 5 percentage points, to 18 percent year-on-year, from 13 percent previously. In the first quarter this year, aggregate Macau casino GGR rose 22 percent, according to official data issued on April 1.
“We estimate MGM [China Holdings Ltd] probably gained the most GGR sequential share (up approximately 50 basis points versus fourth-quarter 2017,” following MGM Cotai’s launch on February 13, said analysts Harry Curtis, Daniel Adam and Brian Dobson in a Macau first-quarter earnings preview.
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"The stronger mass growth [in Macau in the second quarter] should be viewed positively vis- à-vis [the] government’s stated priority”
Japanese brokerage Nomura