Pragmatism likely on Macau concession refreshment: Fitch
Fitch Ratings Inc says it expects the eventual refreshment of Macau’s existing gaming concessions to be a “pragmatic process” against the background of a rebound in gambling revenue for that market.
The concessions of the six current Macau operators expire on various dates in either 2020 or 2022, with the respective licences of SJM Holdings Ltd and MGM China Holdings Ltd set to expire in 2020.
“[The] upcoming concession renewals will be a pragmatic process as the [Macau] government values stability in the marketplace,” suggested Fitch analysts Alex Bumazhny and Colin Mansfield in a Thursday press release.
The head of Macau’s casino regulator said last month that the city’s government plans to disclose details on the eventual refreshment of the gaming concessions later this year.
“We are doing a lot of preparatory work,” said Paulo Martins Chan, director of Macau’s Gaming Inspection and Coordination Bureau. “But it is not yet the time to make an announcement.”
Mr Chan’s comments were made on May 16 on the sidelines of Global Gaming Expo (G2E) Asia 2018.
Fitch said in its latest market update that the Macau casino industry remained on a solid footing. It forecasts “14-percent growth in Macau gross gaming revenues for 2018, which reflects the continued health of VIP and premium mass segments, albeit with some deceleration from 2017.”
The ratings agency added: “Fitch’s positive view on Macau is supported by an expanding middle class in China and infrastructure development in and around Macau.”
In Thursday’s release, Fitch also affirmed Macau-based casino operator MGM China Holdings Ltd’s long-term foreign currency Issuer Default Rating (IDR) and senior unsecured rating at “BB”. The ratings agency added that the outlook for the firm is stable.
The same rating and outlook was assigned to MGM China’s parent company, U.S.-based MGM Resorts International, said the research house.
“MGM [China] will gain market share following the opening of its first Cotai property,” said Fitch. MGM Cotai opened on February 13 this year.
The ratings agency forecasts MGM Cotai “will generate nearly US$350 million” in incremental earnings before interest, taxation, depreciation and amortisation (EBITDA).
Fitch said additionally that MGM Resorts has “headroom for funding of another large-scale project or a moderate operating downturn at the current ‘BB’ rating level given MGM’s liquidity profile and moderate leverage.” The ratings house’s base case forecast however does not include any additional developments in new jurisdictions like Japan.
Japan’s nascent casino industry is moving nearer to realisation with the possible passage this year of the Integrated Resorts (IR) Implementation Bill. MGM Resorts has declared itself a contender for a Japanese casino licence.
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