Macau kicks off public gaming consultation ahead of casino rebidding

Stock Markets23 minutes ago (Sep 14, 2021 09:35PM ET)

(C) Reuters. FILE PHOTO: People wearing masks walk in front of Casino Lisboa, before its temporary closing, following the coronavirus outbreak in Macau, China February 4, 2020. REUTERS/Tyrone Siu

By Farah Master

HONG KONG (Reuters) -Macau’s government is due to begin a 45-day public gaming consultation starting Wednesday as it tries to gauge public consensus ahead of a closely watched rebidding of its multi-billion dollar casinos next year.

Lei Wai Nong, secretary for economy and finance in the world’s biggest gambling hub, said the government will further promote the “sustained and healthy development” of Macau’s gambling industry as there were still some deficiencies in industry supervision.

At a press briefing held on Tuesday, Lei detailed nine areas for the consultation including the number of licenses to be given, increased regulation and protecting employee welfare, as well as introducing government representatives to supervise day to day operations at the casinos.

Shares of Hong Kong listed Macau casinos plunged between 5-15% on Wednesday morning, following heavy falls overnight in shares of U.S. casinos with Macau operations investors panicked over potential new regulations.

A Chinese special administrative region, Macau has massively tightened scrutiny of casinos in recent years, with authorities clamping down on illicit capital flows from mainland China and targeting underground lending and illegal cash transfers.

Beijing has also intensified a war on cross border flows of funds for gambling, affecting the financing channels of Macau’s junket operators and their VIP casino customers.

In June this year Macau more than doubled the number of gaming inspectors and restructured several departments to ramp up supervision.

Macau’s casino operators Sands China (OTC:SCHYY), Wynn Macau (OTC:WYNMF), Galaxy Entertainment, SJM Holdings (OTC:SJMHF), Melco Entertainment and MGM China (OTC:MCHVY) are all required to rebid for their casino licsenses when they expire in June 2022. There has been no clarity on the process from the government on what is required as yet.

D.S. Kim, an analyst at J.P. Morgan in Hong Kong, said they were downgrading all Macau gaming names from overweight to neutral or underweight following the briefing due to heightened scrutiny on capital management and daily operations ahead of the license renewal.

“We admit it’s only a ‘directional’ signal, while the level of actual regulation/execution still remains a moot point,” he said, adding that the announcement would have already planted a seed of doubt in investors minds.

Kim downgraded Macau operators Sands, Wynn and Melco to “underweight” from “overweight” and shifted Galaxy, SJM and MGM to “neutral”.

George Choi, an analyst at Citigroup (NYSE:C) in Hong Kong, said that while the public consultation document offered limited details, the suggested revisions enhance long-term sustainable growth for the industry with “positive implications on the six casino operators”.

He cautioned however that “we will not be surprised if the market focuses only on the potentially negative implications, given the weak investor sentiment”.

The consultation comes as Macau has struggled with a dearth of travellers because of coronavirus curbs since the start of 2020. While gambling revenues have picked up in recent months, they remain at less than half of 2019 monthly hauls.

Macau kicks off public gaming consultation ahead of casino rebidding