Gaming Analysts Predict License Extensions for Macau Casino Giants

The six commercial casino operators in Macau are set to see their gaming concessions expire in June of 2022. However, gaming analysts believe expiry for the coveted permits could be extended.

Recent notes from Morgan Stanley and Macquarie Capital suggest that the Chinese Special Administrative Region (SAR) will delay the gaming expirations for Sands, MGM, Wynn, Melco, Galaxy, and SJM. The analysts point to ongoing issues with COVID-19 as the reason.

With Macau officials focused on the pandemic and economic recovery, odds are increasing that current gaming licenses are extended beyond 2022, the Macquarie commentary explained.

Renewing licenses after a full (gaming revenue) recovery would offer policymakers more bargaining power (specifically over non-gaming capital expenditure), the note continued.

Macquarie believes Macau will seek to extend the licenses by two to three years, meaning the current operating permits could run through June of 2025. Analysts at Morgan Stanley said this week that they believe the June 2025 scenario will be confirmed as the new expiration date.

Macau has released few specifics as to how it plans to reissue gaming licenses in the world s richest casino market. The only concrete detail is that the enclave will replace its current regulatory scheme with a fresh set of policies. Macau s present gaming law was crafted in 2002, and is to run 20 years.

Former Macau Chief Executive Fernando Chui said in 2017 that the goal is to perfect the laws and regulations governing the gaming industry. His successor, Chief Executive Ho Iat Seng, has pledged to of the gaming industry.

The Macau Legislative Assembly is working with community leaders and the six casinos, as well as receiving public input in crafting the next gaming laws. But COVID-19 has slowed the process.

If Macau hopes for a from the coronavirus, analysts believe the casino companies may be afforded more favorable terms than previously thought in the revised gaming regulatory environment.

If policymakers are averse to a messy and drawn-out ownership battle, then gaming licenses will need to be renewed at generally favorable terms. In fact, regulators intentions to retender licenses in just six months gives us more conviction that policymakers intend to maintain the status quo, said Macquarie analyst Edward Engel.

The gaming licenses for SJM Holdings and MGM China, a subsidiary of MGM Resorts, were originally set to expire this year. The two companies successfully petitioned Macau to extend their licenses to expire in conjunction with the enclave s four other gaming operators.

The extensions, however, came at a cost. SJM and MGM each paid MOP200 million ($25 million) to push back their expirations by two years. With Macau s economy devastated from COVID-19 the gaming industry accountable for nearly 90 percent of the region s tax revenue the enclave government could seek to impose hefty license fees for the up to three-year postponement of their licenses.

Representatives from the casinos told Morgan Stanley that they hope to receive word by June 2021 regarding a delay in their gaming licenses terminating.