Industry experts rule out problems in Macau casino licence renewal

Macau's six gaming operators expected to see smooth renewal of permits amid talk of Beijing using issue to gain leverage in Sino-US relations

PUBLISHED : Thursday, 20 February, 2014, 1:16am
UPDATED : Friday, 21 February, 2014, 3:17pm

The gaming licences held by Macau's six casino operators are more likely to be renewed smoothly than to face renewal every five to 10 years, contrary to press reports yesterday, industry experts said.

CLSA consumer and gaming research analyst Richard Huang said he had heard such rumours "from time to time".

"According to my knowledge, there is a clause concerning how the licences will be renewed, which said if there are no disputes on both sides, the licences can be automatically renewed for five years," Huang said.

He said that could be what had generated the rumours.

Some Hong Kong newspapers reported yesterday that when the six casino operators needed to renew their licences, from 2020 their validity could be cut to 10 or even five years because Beijing planned to use the licences as a tool to gain leverage in Sino-US relations.

Half of the six licences in the world's largest gaming resort are held by American enterprises MGM, Wynn and Sands.

Another licence is held by Melco Crown Entertainment, a venture between Lawrence Ho Yau-lung and Australian James Packer.

The other two players are Stanley Ho Hung-sun's SJM and Lui Che-woo's Galaxy Entertainment.

SJM and MGM will need to renew their licences in 2020 while the others will face renewal in 2022.

"When we talk to government officials, we feel that they are satisfied with the gaming operators' performance," Huang said.

Macau's economy is one of the world's fastest growing, with gross domestic product expanding 10.5 per cent year on year in the third quarter of last year, according to official data.

Professor Niu Jun, of Peking University's school of international studies, said the idea of using gaming licences to gain leverage in bilateral relationships was "just impossible".

"This is such a small issue in the eyes of Beijing," Niu said. "There's no point finding trouble here."

Grant Govertsen, the lead analyst at Macau-based Union Gaming Research, said he was not too concerned because he doubted that Hong Kong newspapers spoke for Beijing.

"Our sources are indicating to us that there is no merit to the rumours and that it is just pure and reckless speculation," he said.

Govertsen said if the reported policy was implemented, it would be bad policy that could discourage investment in Macau.

MGM said yesterday its net profit rose 17.7 per cent to HK$5.33 billion last year, compared with HK$4.53 billion in 2012. Earnings before interest, taxes, depreciation and amortisation jumped 19.9 per cent to HK$6.37 billion, while revenue grew 18.2 per cent to HK$25.73 billion.