It is unlikely that the United States-China trade war will become so fierce that Macau casino concessionaires with significant American ownership will lose their right to run gaming in that Special Administrative Region of China.
That is the conclusion in a memo to investors from brokerage Sanford C. Bernstein Ltd. In it, analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu assess the trade spat’s ongoing impact.
“Whenever U.S.-China trade tension heightens, investors start questioning if the U.S. casino operators (Wynn Macau Ltd and Sands China Ltd, and, to a lesser extent, MGM China Holdings Ltd) would lose their Macau gaming concessions,” the report said. It was referring to the Macau units of Wynn Resorts Ltd, Las Vegas Sands Corp, and MGM Resorts International.
“While we acknowledge the souring U.S.-China relationship heightens this risk, we view the scenario where one or more of the U.S. casino operators loses their gaming concession to be remote, unless the relationship sours significantly further into a Cold War environment.”
In the report released on Wednesday, the institution said it rated as “very low” the prospect that a completely different set of concessionaires could replace the six incumbents – including the three with U.S. links – in the retender process that the Macau government has flagged and that would be required to create a fresh concession regime for the market when the current concessions expire in June 2022.
The “most likely scenario” was that “the concessions are effectively renewed for all six parties and the concessionaires bear additional requirements and economic cost,” the note said.
Sanford Bernstein thought there was a “low to moderate” chance that the current economic requirements applicable to concession holders would be carried over to a new concession regime after 2022.
The brokerage foresaw a “high” chance there would be a series of new costs for the right to operate in Macau. The options include: a higher-percentage tax on gross gaming revenue than the current effective rate of 39 percent; the application of Macau’s corporate income tax – from which the current casino operators are currently exempted; a requirement imposed on the companies to build more non-gaming infrastructure; or the creation of an altogether-new fee.
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