Sands China faces lowest risk of losing gaming licence in Macau – analysts

Sands China is one of seven operators that have submitted bids for casino concessions.
Sands China is one of seven operators that have submitted bids for casino concessions.

Analysts at Morgan Stanley pointed out that Sands China is the largest employer of the six current gaming licensees.

Macau.- Analysts Praveen Choudhary and Gareth Leung of Morgan Stanley have said in a note that Sands China is unlikely to lose its gaming licence in Macau when authorities choose the six concessionaires for the next ten years. They note that of the six current licensees, Sands was the largest employer in the first half with more than 25,110 employees, accounting for 26 per cent of the industry’s workforce.

After Sands China came SJM, at 20 per cent and Galaxy at 18 per cent. Sands China also had the highest share of non-gaming sales last year at 27 per cent, 2 percentage points above Galaxy Entertainment Group. Wynn Macau came in third with 20 per cent.

Las Vegas Sands’ Chinese subsidiary is also the largest contributor among existing gaming companies, spending about MOP493.39bn (US$61.4bn) in investments, personnel costs and taxes since 2007. By comparison, SJM invested US$51.4bn, Galaxy Entertainment Group and Wynn Macau US$46.2bn and US$33.1bn, respectively and MGM just U$22.9bn.

The analysts stated: “Galaxy outperformed Sands during the pandemic, which we think was due to better balance sheet and lower credit risk, Once Sands’ gaming licence is renewed and the industry starts making positive cash flow, we expect Sands to reverse this performance.”

Sands China posted a net loss of MOP3.8bn (US$472m) for the third quarter of the year, compared to MOP3.4bn (US$423m) in the same period last year. Net revenue was MOP2bn (US$251m), 41 per cent of that recorded in the same period last year (MOP4.9bn).

The casino operator posted negative adjusted property EBITDA of MOP1.2bn (US$152m), compared with positive EBITDA of MOP258m (US$32m) in the third quarter of 2022. Results were heavily affected by the two-week closure of casinos in Macau in July and the lack of tourists due to a new outbreak of Covid-19 cases.

Sands China is one of seven operators that have submitted bids for new casino concessions. Under the new concession regime, Macau will grant six concessions for a period of ten years. It is expected that the new concession term will begin on January 1, 2023.

Morgan Stanley cuts Macau GGR forecast

Due to ongoing travel restrictions and new Covid-19 cases in China, the brokerage has cut its predictions for Macau’s gross gaming revenue (GGR) for this year and 2023. Analysts have reduced their forecasts by 17 per cent and 3 per cent respectively.

The city’s GGR for 2022 will be just under MOP44.93bn (US$5.56bn), close to 15 per cent of 2019 GGR. The figure for 2023 will be MOP124.29bn, about 43 per cent of 2019 levels.

However, analysts noted that two events expected in November could help boost Macau’s GGR. The first is the possible announcement of the six casino operators to obtain new gaming concessions for the next ten years.

A second positive sign would be the resumption of package tours from mainland China. In September, Macau’s chief executive, Ho Iat Seng, said the Chinese government was going to resume issuing electronic visas for mainlanders to visit Macau in November.

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