Casino shares rallied yesterday following the announcement of the new licenses the incumbent big six will receive by the end of the year, with Wynn Macau leading the trade.
Wynn Macau’s shares jumped as much as 15.14%, where its shares hit HKD5.02, the highest since November 18.
Shares of MGM China, Melco International, SJM Holdings and Sands China rose 13.06%, 8.17%, 6.96% and 1.46%. Galaxy Entertainment Group rose slightly to 0.47%.
The long-awaited announcement has ended major uncertainties faced by the incumbent gaming operators who were hit by Covid-19 restrictions and crackdown on junkets.
The win signals stability and continuity for the gaming operators as they have pledged some MOP100 billion investments for the next decade.
Malaysia’s Genting has failed to secure a license despite market analysts describing the firm as a strong candidate due to its successful non-gaming elements and mass market appeal.
“One of the biggest overhangs of recent years is now removed,” JPMorgan Chase & Co. analyst DS Kim wrote Sunday.
“This could serve as a strong stock catalyst because many investors, especially long-only, were largely staying away from the sector given this ‘tail risk’,” the analyst added.
However, whether Macau’s golden years will return is unclear. Macau has been following Beijing’s zero-Covid policy, which requires strict border restrictions and designated lockdowns when new cases arise.
Lacking transparency
Although the government has announced who scored the highest in the bid process, it had disclosed neither how each company had been scored nor the committee’s evaluation criteria.
According to the committee chairman, Secretary for Administration and Justice Andre Cheong, “the committee has also undertaken multiple rounds of negotiations with the bidders to assist them in perfecting their bids.”
Jorge Costa Oliveira, founder and CEO at JCO Consultancy, believes the awarding of contracts to the incumbent operators is no surprise.
However, “it is important, for transparency purposes, to know the content of the Substantiated Report of the Tender Commission and the basis on which this adjudication was made,” said Oliveira, who is also a regular MDT contributor.
In 2002, the Substantiated Report of the Tender Commission was made public, during one month, at the Macau Government website.
“As regards the concession contracts, it is necessary to have more information. Regrettably, transparency has not been a characteristic of this public tender,” he added.
Wynn Macau to inject MOP4.80b
As negotiations are set to continue for the final contracts, including the final investment for non-gaming elements, Wynn Macau has said it will inject MOP4.80 billion into Wynn Resorts to comply with the gaming law – a move SJM and MGM have also undertaken to complete.
In a filing, the operator has announced the capital restructuring will be made “to enter into a new gaming concession contract.”
The city’s largest gaming law overhaul requires concessionaires to have a minimum share capital of MOP5 billion from the previous MOP200 million.
Meanwhile, the voting rights of Linda Chen, vice chairman and executive director of Wynn Macau Ltd, through her Class A nominative shares will be up by 15% from the current 10%, to also comply with the law.
Chen is set to be the president of Wynn Macau from March 1, 2023, an announcement that was made in July ahead of the gaming license bidding.
