Analysts warn caution amid Macau’s proposed new gaming laws

Authorities expect to finish the amendment of the gaming law in the final quarter.
Authorities expect to finish the amendment of the gaming law in the final quarter.

Brokerage JP Morgan has warned that Macau’s gaming sector could be “un-investable” due to the possibility of increased oversight of gaming concessionaires and junket operations.

Macau.- Fears are mounting over the possibility of increased supervision over Macau casinos. Now brokerage JP Morgan has warned investors to remain cautious until it is clear what will happen to concessions.

Analysts DS Kim, Amanda Cheng and Livy Lyu said: “We think the sector could stay nearly un-investable until the clarity on the next concession emerges, an event that we view as unlikely in the next six months.”

Last week, reports of a possible change in current gaming laws caused Macau casino stocks to fall sharply. Sands China saw a 32.51 per cent drop in its shares while Wynn Resorts’ share price declined by 10.85 per cent.

The public consultation on the revision of the city’s gaming law has proposed expanded oversight of gaming tasks, profit appropriation, and the election of “delegates” to Macau’s gaming concessions to allow a “greater checking” limit on the activity of the gaming firms. 

Analysts said: “We interpret the Government’s surprise announcement as an effective ‘SOE-rization’ of the industry, which makes it difficult to establish a floor for both earnings profile.”

The “state-owned enterprise” (SOE) term is used to describe a company or legal entity that represents a government-controlled company or legal entity that participates in commercial activities.

Increased supervision over Macau casinos could hurt premium mass market

Ben Lee, managing partner of iGamiX Management & Consulting, has expressed his disagreement with the decision to elect “delegates” to Macau’s gaming concessions in order to have “greater checking” on the activity of the gaming firms.

In statements to Asian Gaming Brief Lee said: “This direct supervision aspect has been puzzling. There’s no way any government representative would be familiar with the commercial and financial transactions and processes that go on in large casinos. 

“You need to think about what they are after, what their intentions are, and what they are looking to supervise.”

He added that the government’s desire for increased supervision may be related to the active promotion of gambling activities in China and referred to Beijing’s crackdown that includes the suppression of entertainment and video games.

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