Operators to face extra 20% of non-gaming investment if GGR tops MOP180b

The six gaming operators are expected to face another burden if gaming revenues reach MOP180 billion each year, as they will be required to invest an extra 20% in non-gaming spend.

Considering the fresh licenses that will allow the companies to operate for the next decade, the operators will have to exceed their pledged 108.7 billion patacas, which already accounts for more than 90% of their total investment.

The big six announced Friday that the amount would cover projects such as convention and exhibitions, entertainment and performances, sports events, art and culture, health care and themed entertainment.

Brokerage firm Morgan Stanley predicts Macau’s gross gaming revenue will exceed USD22 billion by 2027, as cited in a report issued by Asia Gaming Brief.

Analysts consider the additional investment could “represent a much larger burden on FCFE (free cash flow to equity) and EBITDA,” particularly for operators MGM China and SJM.

The additional investment is required by the largest gaming overhaul, despite the sector bleeding cash with no certainty on recovery.

With the embattled gaming sector suffering slumps – particularly in July this year where it recorded the worst gross gaming revenue in decades – the potential return over the next 10 years is unclear, particularly amid the industry-wide reshuffle.

Whether Macau’s golden years will return is also unclear.

However, with mandatory quarantine requirements easing and the city gradually coming to live with Covid-19, casinos hope that 2023 will usher in a new era for the sector.

Over the weekend, the government said the six concessionaires had made pledges according to their respective abilities, outlook and financial status, which it sees as representing their confidence in the future of tourism in Macau.

In the note, analysts at Morgan Stanley predicted “Macau will allow operators to start investing only from 2024, given that 2023 will still be a recovering year.”

Meanwhile, amid the billions of investments pledged, casino concessionaires must also pay an annual concession premium with a fixed amount of MOP30 million.

Variable amounts will be levied on the number of table games and gaming machines such as MOP300,000 for each VIP table game, MOP150,000 for each mass-market table game, and MOP1,000 for each gaming machine.

The total numbers of gaming tables and slot machines approved by Macau’s gaming authorities are 6,000 and 12,000, respectively.