In an effort to reassure a slightly jumpy public, the Macau government has released the results of its public consultation. The government instigated the consultation ahead of June 2022. On June 26, the Special Administrative Region of China will have to renegotiate the terms of its concessions.
In the argot of the Macanese casino industry “concessions” are the agreements that allow companies to operate casinos in Macau.
Macau’s casino industry can take a bit of adapting to. Especially, if you are used to the Vegas model of business. Macau has a very limited number of concessions (six under the current rules). Plus the entire Macanese public has a stake in their operation through the Wealth Partaking Scheme.
Under the Wealth Partaking scheme, once a year, the government issues a cheque to every Macanese resident. The size of the cheque is based on how well the casino industry performed that year. This regular cash injection provides a small annual boost to the local economy in the summer — although this year the cheques went out a little early, in April, as a kind of COVID stimulus.
The people of Macau were also able to make their voices heard through four public consultation sessions held back to back between October 22 and October 25.
The government had until March 2022 to release the report. However, the early release suggests that the powers that be are making real efforts to get the paperwork done. And they seem invested in doing so before the concessions expire in June 2022. This will save them the added complication of temporary extensions.
This will allow the market to get on with planning the next five to twenty years. Exaclty how long depends on the new concessions’ lengths.
The center cannot hold
COVID, China’s somewhat fickle hegemony, Alvin Chau’s arrest, and the upcoming expiration of concessions have all made the markets jumpy this year. In September, the casino market lost a quarter of its value overnight. While just a few weeks ago they took another tumble after SunCity’s troubles.
Anything to stabilize the stock market will be much appreciated by investors.
So far the report appears to be a step in the right direction. The response to the consultation has been largely positive to neutral.
Credit Suisse’s analysts, for example, took a strongly positive stance. They wrote that the company believes “this summary should somehow ease investors’ concerns on the sector’s longer-term outlook including shareholding structure, ability to pay dividend and more importantly, shed some light on the government’s consideration for the gaming license.”
Deutsche Bank, on the other hand, called it a non-event.
The document suggests that the renewals will be more or less simialr of the current status quo. Though the government wants to place more emphasis on expanding non-gambling forms of revenue. Big integrated resorts are very well positioned for this kind of expansion.
However, there are some elements that suggest the government is trying to minimize scrutiny of the document. The “summary” of the report runs long at 45 pages in Chinese and 69 in Portuguese. Plus, it went public just a few minutes before the city closed up for Christmas.
The real test, therefore, will come in June 2022. That is when we get to see exactly which parts of the report will become reality.