Mixed responses at odds of Genting winning a new Macau gaming concession
By Tony Lai 15 Sep 2022
Gaming observers have mixed responses to the likelihood of Genting Group winning one of the Macau gaming licences over the six incumbent operators after a company linked to the gaming conglomerate made a surprise bid on Wednesday (yesterday).
A government committee, overseeing the public tender for as many as six 10-year gaming concessions in Macau, confirmed in a statement that a total of seven firms submitted their respective proposals before the tender was concluded on Wednesday, and the committee will open the bids on Friday (tomorrow).
Besides the existing Macau gaming operators, a Macau-registered firm — GMM Ltd, which is linked to Lim Kok Thay, Malaysian gaming tycoon and chairman of Genting Group — also vies for a concession that will begin in 2023, as the current six licences will expire by the end of this year.
Macau-based gaming analyst Alidad Tash told MNA it’s “very unlikely” the bid from the firm linked to the Malaysian tycoon would succeed. “Why would the current six let go? They’ve got everything the government has asked them to do: they have properties, they have employees, [and] they have 20 years of history,” he said.
“Why would the government just go and take another company from the outside?” said Mr Tash, managing director of consultancy 2NT8 Ltd. “I’m not surprised [Genting tendered a bid] … but what I’m saying is I just think that they won’t get it.”
It’s not the first time Mr Lim has laid eyes on the Macau gaming market. In the liberalisation of the local casino industry two decades earlier, Mr Lim submitted a bid under the name of Macau Star, S.A for a gaming concession in the public tender in 2001.
But the company only secured the sixth place among 21 bidders, failing to win a seat in the Macau market, as the local authorities originally only granted three concessions 20 years ago which later evolved into three concessions and three sub-concessions.
“It is unlikely for a government to choose a new foreign operator over incumbents, who have invested billions of dollars and employed local staff over two decades, including in an unprecedented downturn like this,” brokerage JP Morgan said in the latest research note.
The analysts refer to the slump the local gaming industry has experienced since the onset of the COVID-19 pandemic in early 2020 and Beijing’s crackdown on cross-border gaming and illicit gambling activities. Latest government figures show the Macau gaming revenue amounted to MOP28.86 billion (US$3.6 billion) in the first eight months of 2022, plunging by 53.4 per cent year-on-year and only translating to 14.6 per cent of the pre-pandemic volume.
The JP Morgan analysts also said the recent bankruptcy of Genting Hong Kong “may not bode well” for the group’s chance in Macau. Genting Hong Kong, part of Genting Group, is a listed firm that operates cruise business among others, but it filed for bankruptcy in January 2022 due to the negative impact on its operation caused by the pandemic.
From the perspective of Macau-based gaming analyst Ben Lee, the bankruptcy of Genting Hong Kong is just an “isolated incident”, as the conglomerate’s operations in other places remain financially robust. Genting Group operates or manages resorts and casinos in Malaysia, Singapore, New York, Las Vegas, London and others, and most are under the brand of “Resorts World”.
The managing director of IGamiX Management & Consulting, indeed, thinks GMM has “a fairly good chance” of winning one of the six new concessions. “One big advantage Genting has is its experience and willingness to invest in theme parks. Macau has talked that up in the past, and all the existing six operators — despite Galaxy [Entertainment Group] talking about it — walked away from the idea,” Mr Lee told MNA.
“Genting is the only one with the ability and the propensity to build and run a theme park. All they need is the land,” he said.
The Malaysian tycoon might also seem to be an appropriate candidate to hold a Macau gaming licence amid the geopolitical tensions between the United States and China. Three of the six incumbent gaming operators in Macau come from the world’s largest economy: Sands China Ltd, MGM China Holdings Ltd and Wynn Macau Ltd.
“This new concession tender is being very carefully managed, and only the parties that are deemed patriotic, sufficiently patriotic, will get the new concession,” said Mr Lee, adding Mr Lim is an ethnic Chinese, a profile that can help Genting’s chance in the tender.
“In the most recent Winter Olympics held in Beijing, Genting was featured heavily in the local press with its ski resort that hosted one or a couple of the ski events in the Winter Olympics,” he added. Genting Resort Secret Garden, which is located in Zhangjiakou, Hebei province, staged the freestyle skiing and snowboard skiing events during the Beijing 2022 Winter Olympics.
Wynn Macau is most at risk for losing a licence among the six incumbent operators, if Genting’s bid succeeds, Mr Lee stated, as it has done the least in terms of developing non-gaming offerings and building bridges with both the local authorities and Beijing.
“An indication of this is that we’ve seen many senior executives of Wynn leave over the last two months,” he added. For instance, Wynn Macau announced this July that Ciarán Carruthers, the chief operating officer of the Wynn Macau property on the Macau peninsula, would leave the company by the end of this month, while Ian Coughlan, the company’s long-serving president, would also quit his role in February 2023.
Financial news agency Bloomberg has recently reported Wynn Macau is seeking to create a new senior management role and the prospective candidate should have a deep understanding of the Chinese culture and market.
Talking about the odds of Genting in the Macau race, brokerage Nomura said in a recent research note: “Genting brings to the table its experience in developing family-friendly integrated resorts, which is a direction the Macau government wants its leisure industry to diversify to, away from the current overt focus on gambling in the incumbent concessionaires’ properties.”
“As a new entrant, [GMM] is making a fresh bid and can design a resort which addresses the government’s priorities, unlike the incumbents who have already designed and developed resorts more suited to the VIP-heavy days of old,” the research note read. “GMM can also budget a lower capex to be more suited to the new normal of structurally lower industry GGRs [gross gaming revenues].”
One of the major reasons analysts and observers had thought only the incumbents would bid for Macau’s new concessions before GMM made a surprise bid on Wednesday is that the government has reiterated there will be no new plots in Macau zoned for the development of gaming resorts except the existing facilities.
The Macau government has said there would be “a seamless transition” between existing and new operators should a new company win a gaming concession. For instance, the government has signed contracts with the incumbents that 19 casinos directly owned by the six concessionaires and sub-concessionaires would revert back to the government “without any cost” by the end of this year when their current licences expire, and the government would lease these gaming venues to the new concessionaires.
But this will result in a situation where should a new company win a gaming concession it will operate a casino inside an integrated resort that is owned by the previous concessionaire.
“If an existing concessionaire does not get a new concession, it will be in their interest to do a deal with the winner,” Mr. Lee illustrated, as it would lose money for running resorts without a casino.
He also highlighted that a subsidiary of Genting still has stakes in the Treasure Island Resort World complex, located next to Grand Lisboa. “That project is originally due to open by the end of this year, which would be perfect timing for them to convert [part of the facilities] into a temporary casino.”
The Treasure Island Resort World hotel and shopping mall complex is being developed by Treasure Island Entertainment Co Ltd, in which Genting Macau owns a 75-per cent stake. Genting Hong Kong announced in November 2020 that it had sold 50 per cent of stakes in its wholly-owned subsidiary Genting Macau to local entrepreneur Ao Mio Leong.
It is now not immediately known whether Genting Hong Kong, which has filed for bankruptcy, still owns half of its interests in Genting Macau.
The project, covering an area of 8,100 square metres with a total construction cost of about MOP4.7 billion (US$583.8 million), will provide 600 hotel rooms, while its shopping mall will feature French department store brand Galeries Lafayette and others.
The management of Treasure Island Resort World told MNA earlier this year the project would not provide a casino and the project might begin trial operation as early as this October.