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A plucky local upstart will take on Macau’s moguls

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With frayed US-China relations dealing American giants Sands China, Wynn Macau and MGM China a weaker hand, homegrown names will try their luck.

[HONG KONG] A plucky local upstart can take on Macau's moguls. Licences in the world's largest gambling hub start to expire in 2020, forcing all players to pitch for a spot on the casino floor. With frayed US-China relations dealing American giants Sands China, Wynn Macau and MGM China a weaker hand, homegrown names will try their luck.

For the Macanese government, this is a chance to push for change. Officials could shake up a strip highly concentrated in American hands, and may even allow an extra, seventh operator. Today, three US-owned names control more than 60 per cent of industry ebitda (earnings before interest, taxes, depreciation, and amortisation), according to JPMorgan. Galaxy Entertainment, Melco and SJM Holdings, set up in Macau, account for the rest.

In private, lawyers and financiers say the government would prefer locals to get a bigger slice of those earnings, worth some US$7 billion in 2017. They point to modest table allowances for newer US-owned properties as evidence of a tougher attitude.

US operators' position is certainly more vulnerable since US President Donald Trump's trade fight with the People's Republic began: their stocks have tracked diplomatic highs and lows. This is especially true for the US$35 billion Sands China, whose boss, Sheldon Adelson, has close ties to the US leader. Mainland tourists and money are the resorts' lifeblood, after all, and the special administrative region answers to Beijing.

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Meanwhile, entrepreneurs in Asia's own Las Vegas are readying their bets. Suncity controls about half of all VIP gaming in the territory through its junket business, which organises glitzy escapades. It is expanding into casinos overseas and Andrew Lo, executive director of its Hong Kong-listed unit, says the company would pursue a licence in Macau if given the chance.

Other homegrown aspirants include Golden Dragon and Macau Legend. The former owns so-called "satellite" casinos, which strike deals with permit-holders to set up shop. Hong Kong-listed Legend - whose directors include Laurinda Ho, granddaughter of casino kingpin Stanley Ho - owns the Macau Fisherman's Wharf, a sprawl of other satellite venues, hotels – and a replica of Rome's Colosseum.

Full licences would mean they are not at the mercy of more powerful partners, and can more easily raise funds too.

On the Cotai strip, expect local punters to raise the stakes.

CONTEXT NEWS

Licences for Macau casino operators SJM Holdings and MGM China are set to expire in 2020, while contracts for the remaining four operators Galaxy Entertainment, Melco International, Sands China and Wynn Macau will end in 2022.

The licences were first awarded in a complex process in the early 2000s. Government officials have said there may be a new public bidding process when they expire.

REUTERS