It is unlikely that any of the U.S.-owned gaming operators will come up short in their bids for a new concession to operate in Macau, according to brokerage Sanford C. Bernstein, which described such a scenario as “remote.”
“We view the scenario where one or more of the U.S. casino operators lose their gaming concession to be remote, unless the [U.S.-China] relationship sours significantly further and we see directed action against U.S. businesses in China, which would raise risk levels in Macau as well,” said Bernstein in a Wednesday note cited by gaming news website GGRAsia.
Other analysts have suggested that the U.S.-owned concessionaires – Wynn Macau, MGM China and Sands China – make for attractive targets for Chinese retaliation against U.S. tariffs. These companies are especially vulnerable, the analysts say, because of the closeness of former and existing shareholders with U.S. President Donald Trump.
So far, Chinese retaliation has been “largely restrained,” according to Bernstein, and has not targeted U.S. business operating in China. “Directly attacking U.S. business (especially ones that have been solid partners to the Macau government) is not a very likely course of action,” the brokerage said.
Analysts Vitaly Umansky, Tianjiao Yu and Kelsey Zhu therefore believe that the “most likely scenario” involving the new tenders will be that “all six concessionaires will have new concessions and there will be no new entrants.”
They said that the local government still has a range of economic levers at its disposal, including “altering the gross gaming revenue (GGR) tax, imposing taxation on gaming profits, imposing taxation on dividends, [and] mandating upfront fees.”
After brief extensions were granted to casino operators SJM and MGM China last year, all six concessions are due to expire in June 2022. Little is known about the requirements of the future tenders, aside from the likely scenario of having diversification obligations written into the new contracts.
The Macau government wants to have a bill amending the city’s gaming law ready by next year.
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