Wynn Macau leads increase in Macau casino stocks following new licenses announcement

Wynn Macau led an improvement of Macau gaming stocks on Monday, November 28th in Hong Kong, following the city’s government announcement over the weekend that its six current casino operators will acquire new licenses to operate in the largest gambling center in the world from January.

Continued stability for Macau operators:

Shares of Wynn Macau 1128.HK jumped 14.2% in early trade to end HK$4.98, their highest level since October 10th, aka their largest daily profit since October 2011.

The long-awaited licenses announcement shows stability and flow for Macau operators, who have invested more than 50 billion dollars in China’s special administrative region over the past 20 years.

On Monday, UBS wrote: “This removes a major overhang for the sector, particularly for the U.S. operators and should be taken as a strong positive by the market.

“We view this as the best outcome for Macau’s gaming industry and the economy as it ensures a seamless transition into the next concession period starting on January 1st 2023.”

Chinese shares of Galaxy Entertainment, Sands China, SJM, Melco International and MGM China rose from 1.2 to 12.1%. However, these shares fell 2.1% in the benchmark Hang Seng Index.

A missed opportunity:

Genting, Malaysia’s leading operator, missed the opportunity to get a license. Its shares were not traded on Monday due to a national holiday in Malaysia.

Genting Malaysia was seen as a strong contender for the Macau license because of its non-gaming experience and mass market appeal, a key criterion for Beijing, which is persistent that Macau move away from gambling and build strength to attract foreign tourists.

Macau’s total reliance on gambling:

Macau’s government has motivated casino operators to move away from gambling as many operators are unable to recover in the middle of the COVID crisis, highlighting Macau’s extreme reliance on gambling and the need to change that.

According to UBS, Macau officials said: “The main consideration for granting the 10-year licenses included ensuring local employment, developing overseas tourists markets and developing non-gaming projects,

We believe non-gaming investments should yield a reasonable return as new hotel rooms in and around existing gaming facilities are the highest return investments in Macau, higher than gaming, thanks to operating leverage.”

Wynn Macau officials said: “In order to enter into a new gaming concession contract, our unit Wynn Resorts (Macau) S.A., which awarded a gaming concession, will conduct a capital restructuring, boosting its registered capital to 5 billion patacas (621.20 million dollars) from 200.1 million patacas.”

Erlier in November, MGM China officials said: “We have entered into a loan agreement with our controlling parent MGM Resorts International, which has agreed to make available a revolving loan facility of up to 750 million dollars.”