Sands China Should Win Its Macau Concession Renewal Bid

While there is still time before the results are out, projections about who will come out with a concession aren’t the be-all and end-all when it comes to Macau’s casino industry. Tough operating conditions and new rules mean businesses will probably have their hands full while the region slowly recovers.

Morgan Stanley Weighs in on Renewal Bids

Macau’s government created public tender committee that started accepting bids for the six open gaming license concessions in September, which sparked a frantic discussion on whether and which applicant would win a license. A recent report by Inside Asian Gaming (IAG) outlined what Morgan Stanley has to say about it, with the investment company speculating that Sands China is the least likely to lose its bid.

IAG reported that according to analysts Praveen Choudhary and Gareth Leung, this is most likely to happen due to several factors. One of the reasons outlined was that Sands China – a subsidiary of Las Vegas Sands Corp. – was the largest employer of the current operators in the special administrative region (SAR), with its employees representing close to 26% of the total workforce in the industry.

The other reason described was that Sands China is also generating 27% of non-gaming revenue, that being the largest among the list of concessioners in the SAR. This is probably – at least in part – thanks to Sands China also being the largest investor in the region, with more than $60 billion paid in taxes, staff costs and capital expenditure.

Winning Gaming Concessions Isn’t Everything

It’s a total of seven companies battling for the region’s gaming concessions, with all of them having their bids accepted by the city’s public tender committee. Wynn was the first one to put down its re-tendering bid, with the other companies – Sands China, MGM China, Galaxy Entertainment, SJM Holdings and Melco Resorts – following soon afterwards. The seventh company, GMM Limited, also saw its bid accepted conditionally.

While some companies have publicly spoken about their confidence about receiving a concession, there’s still time for development, as the end date for the current round of concessions is December 31. The new laws in the SAR stipulate that approved operators must not only run their properties but also attract overseas visitors and develop non-gaming investments if they receive their ten-year license. This is probably one of the main reasons for Morgan Stanley analysts to perceive Sands China as the least likely to lose its bid since the company is already a chart leader in terms of non-gaming revenue.

While others will most likely have to follow suit, Macau’s business has been very heavily affected by the global pandemic and is still under pressure in the face of China’s zero-COVID measures. The results for 3Q22 were rather grim, resulting in projections for 2022 to be a record-low year for the industry. The losses reported were further worrying after Morgan Stanley estimated that the combined debt of Macau’s casinos was to reach somewhere around the $24 billion mark, which is also a very bad record to hit. So, no matter what happens with Macau’s gaming concessions, businesses will be facing a tall task in making sure the road ahead is clear during the region’s slow recovery.