Despite having global casino and non-gaming resort operations of internationally-competitive standard, Genting Malaysia Bhd would not have been able to offer Macau anything of “outright” superiority to the six current operators, suggested financial services group Citi, in a Sunday note.
A Saturday press conference by the Macau commission overseeing the city’s public tender to award new 10-year casino concessions named the six incumbents as “provisional winners”.
A proposal by a Macau-registered entity linked to Genting Malaysia, called GMM Ltd, was not among the preferred bids, stated the commission.
The authorities did not outline the specific reasons for each of the six sitting licensees being chosen. But in a press release afterwards, the government said all six had met the requirements set by the local authorities regarding “safeguarding” the employment of Macau ID holders, presenting plans to expand the source markets to “customers from foreign countries”, and developing projects related to non-gaming activities.
Citi analysts George Choi and Ryan Cheung said in their memo: “While we acknowledge Genting is a world-class casino operator, so are the six incumbents. Our view has always been that Genting does not possess any attributes that are outright superior versus the incumbents that would justify a change.”
Some industry observers had speculated that Genting Malaysia’s experience in non-gaming – it runs non-gaming resort business in Malaysia, as well as the Genting SkyWorlds theme park at its monopoly Resorts World Genting casino complex near the Malaysian capital Kuala Lumpur – might sit well with the Macau government.
But David Green, a consultant who was involved with Macau’s gaming market liberalisation process at the turn of the current century, told GGRAsia that the fact incumbents would not have to hand over their non-gaming infrastructure to the Macau authorities were one of them to be displaced by a newcomer, presented a “significant practical impediment” to awarding a concession to Genting Malaysia.
The Citi analysts also observed that the details of what each incumbent will have to pledge in terms of amount of spending annually on non-gaming operations during the life of the new concession was still to be disclosed.
Gloria Tsuen, vice president and senior credit officer at Moody’s Investors Service Inc, said in commentary issued on Monday that the ratings agency continued “to expect the final contract terms to be manageable financially” by each of the winning bidders.
But she added, referring to mainland China’s Covid-19 containment strategy, also followed by Macau, and involving periodic tightening of testing and travel rules: “The resurgence of Covid cases in China is again delaying a market recovery and is a credit negative.”
For its part, Citi also noted that Genting Malaysia’s investors had not attributed significant value to the casino operator’s chances in the Macau tender process.
“Having looked at Genting Malaysia’s share price performance since it announced its participation in the Macau gaming licence tender in mid-September, we believe the market never thought it had a serious chance,” stated Citi.
Citi also addressed the issue of some market speculation that the Genting group might subsequently seek to invest in one of the freshly reinstalled Macau incumbents.
The institution’s memo noted that, at Saturday’s press conference, the authorities stated that “any change in shareholdings in concession companies will be regulated by the relevant law” which “states that any change of 5 percent or above in the shareholding of a concession company requires the approval from the [city’s] Secretary for Economy and Finance”.
Sep 21, 2023Fitch Ratings Inc has affirmed the long-term issuer default rating of casino operator Genting Malaysia Bhd at ‘BBB’, an investment grade, according to a memo published on Wednesday. The ratings...
Sep 21, 2023
”Genting Malaysia’s revenue rebound has been slower than our expectations, and the impact on leverage has been compounded by Empire’s weak metrics”
Akash Gupta, Shiv Kapoor and Hasira De Silva
Analysts at Fitch Ratings