December 31, 2018 / 2:25 AM / a year ago

Breakingviews - A plucky local upstart will take on Macau’s moguls

Test chips with security measures by Gaming Partners International (GPI), a provider of casino currency and equipment, are displayed on a gaming table during the Global Gaming Expo Asia in Macau May 22, 2013. REUTERS/Bobby Yip

HONG KONG (Reuters Breakingviews) - A plucky local upstart can take on Macau’s moguls. Licenses in the world’s largest gambling hub start to expire in 2020, forcing all players to pitch for a spot on the casino floor. With frayed U.S.-China relations dealing American giants Sands China, Wynn Macau and MGM China a weaker hand, homegrown names will try their luck.

For the Macanese government, this is a chance to push for change. Officials could shake up a strip highly concentrated in American hands, and may even allow an extra, seventh operator. Today, three U.S.-owned names control more than 60 percent of industry EBITDA, according to JPMorgan. Galaxy Entertainment, Melco and SJM Holdings, set up in Macau, account for the rest. In private, lawyers and financiers say the government would prefer locals to get a bigger slice of those earnings, worth some $7 billion in 2017. They point to modest table allowances for newer U.S.-owned properties as evidence of a tougher attitude.

U.S. operators’ position is certainly more vulnerable since President Donald Trump’s trade fight with the People’s Republic began: their stocks have tracked diplomatic highs and lows. This is especially true for the $35 billion Sands China, whose boss, Sheldon Adelson, has close ties to the U.S. leader. Mainland tourists and money are the resorts’ lifeblood, after all, and the special administrative region answers to Beijing.  

Meanwhile, entrepreneurs in Asia’s own Las Vegas are readying their bets. Suncity controls about half of all VIP gaming in the territory through its junket business, which organises glitzy escapades. It is expanding into casinos overseas and Andrew Lo, executive director of its Hong Kong-listed unit, says the company would pursue a licence in Macau if given the chance.

Other homegrown aspirants include Golden Dragon and Macau Legend. The former owns so-called “satellite” casinos, which strike deals with permit-holders to set up shop. Hong Kong-listed Legend - whose directors include Laurinda Ho, granddaughter of casino kingpin Stanley Ho - owns the Macau Fisherman’s Wharf, a sprawl of other satellite venues, hotels – and a replica of Rome’s Colosseum. Full licenses would mean they are not at the mercy of more powerful partners, and can more easily raise funds too.  

On the Cotai strip, expect local punters to raise the stakes.

- This is a Breakingviews prediction for 2019. To see more of our predictions, click


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