Three-year concession extension likely for Macau ops: MS
Investment bank Morgan Stanley says the Macau government is likely to extend the existing six casino concessions for three years, until 2025. In a note published on Friday, the institution said it expected such a decision to be taken by June next year.
Macau’s current six gaming licences expire in June 2022. The city’s chief executive, Ho Iat Seng, can extend the existing concessions for an aggregate of up to five years, as allowed under the current gaming law.
The Macau government has recurrently stated it plans to have ready by 2021 a bill amending the city’s gaming law. The local authorities say such a step is necessary, ahead of a public retender process.
According to the local government’s policy agenda for 2021, the Macau authorities plan to start revising the city’s gaming law by the first quarter of next year, and to complete the task by the fourth quarter, prior to submitting a finalised draft bill to the Legislative Assembly. But the timetable could be influenced by a public consultation process the government has pledged to hold, the document noted.
Some analysts have told GGRAsia that, in the light of the legislative timetable announced by the city’s government, it would be hard to complete a public retender process prior to June 2022.
“For open bidding to happen, Macau has to run a public consultation (earlier planned for second half of 2020), and then put the new law in the Legislative Assembly (the draft is not ready yet), which could take more than a year,” noted Morgan Stanley in its Friday note.
Analysts Praveen Choudhary, Gareth Leung and Thomas Allen noted that the Macau government had already in March 2019 extended the concessions for SJM Holdings Ltd and MGM China Holdings Ltd, “as necessary preparation for an open bidding process could not be finished before the licenses expired”.
They added: “We believe we are in a similar situation due to Covid-19.”
In case of a concession extension, it would be expected that operators would be required to pay a “nominal amount” to the Macau government, stated Morgan Stanley.
The Macau government approved in March 2019 an extension to the gaming concessions of SJM Holdings and MGM China to June 26, 2022. Such extension aligned the terms of these two gaming concessions with the other four operators in the Macau market, the licences of which are due to expire in June 2022.
Each of the companies had to pay MOP200 million (US$24.7 million) to the government by way of compensation, it was announced at a time.
In its Friday note, Morgan Stanley also looked into the potential main investor concerns linked to an open bid process for new Macau gaming licences.
“We do not expect the tax rate to be increased (or changed) meaningfully since the returns on newer casinos have been lower,” the institution said.
Morgan Stanley said that, as Macau’s fiscal reserve was ample, the local government could ask for “a nominal one-time fee only” for each fresh concession.
The investment bank entertained the possibility of a new entrant being given a licence as part of the open bid process. “But without a big piece of land to go with it, there will be no competitive threat to the existing players,” Morgan Stanley added.
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