Macau casinos licence renewal attached to Hengqin plans, analysts say

Macau plans to diversify its economy by expanding into Chinese island, Hengqin.
Macau plans to diversify its economy by expanding into Chinese island, Hengqin.

Analysts at JP Morgan Securities said the casino licences renewal after June 2022 could involve committing certain budgets for non-gaming projects in the city.

Macau.- Macau’s current casino licences will expire in June 2022 and a new open tender process would be conducted in the medium term.

However, analysts at JPMorgan Securities believe the public tender may involve bidders “voluntarily” committing “certain budgets for non-gaming projects in Macau and/or Hengqin” and “social responsibility”.

In 2020, Chief Executive Ho Iat Seng confirmed plans to invest MOP400billion (€46billion) in expanding into the neighbouring Chinese island, Hengqin.

Over the years, several Macau casino operators have pledged to develop a non-gaming industry in Hengqin. 

Sands China even spoke in favour of Macau’s project to invest in Hengqin Island. 

It said in a press release that it “is privileged to be making contributions to the economic diversification of Macau and the development of the city into a world centre of tourism and leisure”.

Last year, Hengqin was designated a special zone by Chinese authorities to help diversify Macau’s economy and move away from its reliance on gaming.

The Guangdong-Macau cooperation zone in Hengqin will be focused on technology and high-end manufacturing, traditional Chinese medicine, tourism and MICE as well as finance.

According to Amanda Cheng and Livy Lyu, analysts at JP Morgan, if casino operators are asked to support Hengqin plans “this would indirectly lower operators’ return on invested capital to some extent”.

GGRAsia revealed JPMorgan noted that this potential for lower returns on capital during the pandemic is separate from any uncertainty in Macau visitor numbers and casino gross gaming revenue (GGR).

But the agency added on the regulatory outlook that bidders could face: “We think major disruptions, such as licence losses or tax hikes, are unlikely”.

JPMorgan noted that these things were not mentioned in the summary report of the recent public consultation to revise Macau’s gaming regulatory framework.

The Macau government has said it will update the gaming regulatory framework ahead of a public tender for new Macau casino rights.

Macau publishes plan for economic diversification

Last December, the government of Macau issued its “Second Five-Year Plan for Economic and Social Development for the 2021-2025 period”

The plan proposes measures to accelerate a proposed economic diversification and cooperation with other regions.

The report reveals authorities want to promote industries such as medical and health, modern finance, high-tech, exhibition and trade, and culture and sports. 

The plan also points out that while ensuring the stable development of the gaming industry, Macau needs to promote the development of creative and distinctive non-gaming industries to attract more international and diversified tourists.

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