Macau Casino Stocks Surge as Licenses to Stay at Six but Tenure Slashed to Ten Years

Macau’s next regulatory regime will include six concessions, or licenses, with the tenure of those licenses halved from 20 years to a decade, the gambling hub’s Executive Council said Friday.

Macau casinos
Macau casinos
Macau’s Casino Lisboa, pictured, is owned and operated by SJM, which formerly enjoyed a casino monopoly in Macau and was among the first licensees after liberalization. (Image: Lam Yik Fei/NYT)

The long-awaited clarification on forthcoming reforms caused shares in LVS, MGM Resorts, and Wynn Resorts to surge in pre-market trading. The draft law paves the way for Macau’s six operators to have their licenses renewed beyond their expiration in June, removing a great deal of uncertainty, particularly for the US companies.

The Executive Council said it would also do away with the sub-licensing system. Under the current model, there are three concessionaires, SJM, Galaxy Entertainment, and Wynn Resorts. MGM, LVS, and Melco operate as sub-concessionaires of SJM, Galaxy, and Wynn, respectively.

The proposal, which must be approved by the legislature, also requires operators to increase minimum share capital from to 5 billion patacas ($623.67 million) from $200 million patacas ($25 million). Meanwhile, an operator’s managing director, who must be a permanent Macau resident, will have to hold 15 percent of share capital, up from 10 percent.

There is no plan to raise casino taxes which will remain at 35 percent of gross gaming revenue.

Fears Unfounded

In September, Macau casino stocks plummeted on the news that the special administrative region’s government would hold an in-depth review into its gaming law.

Investors feared a Beijing-backed regulatory crackdown, but few of their worst fears have been realized.

A proposal to appoint government delegates to company boards to monitor the licensees’ operations, for example, has not materialized. One anonymous casino executive told Reuters Macau’s government ditched the plan following feedback from operators.

Beijing has become increasingly dissatisfied with Macau’s reliance on its gambling industry, which it believes encourages capital flight from mainland China.

Extensions Possible

Speaking at a press conference Friday André Cheong, spokesperson of the Executive Council and Secretary for Administration and Justice, said he hoped the draft law could be implemented as soon as possible. However, if existing operators needed an extension to their licenses beyond June, then that would be granted.

“All the works, regarding the gaming law revision and preparation for the new public tender, will be carried out in an orderly manner. If the current licenses have to be extended, it will only last for a short time period,” he said.

While the six concessions appear to be tailormade for those existing operators, they will still have to bid for them, and Cheong said other companies are welcome to join the public tender.

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