Problems with Licenses for slot machines in Macau will not be resolved next year

Problematics regarding licenses for slot machines in Macau will not be resolved next year

As representatives of the Morgan Stanley consulting company predict, issues related to updating gambling licenses for the current six casino operators in Macau will not be resolved next year.

On Monday, December 17, the stock division of the investment bank issued a note stating that the issue of licensing the slot machine halls in Macau will not be resolved in 2019.

The first two licenses may be renewed in the first quarter of 2020, and the remaining four - in the next two years.

The licenses of six active Macau operators expire on various dates in 2020 or 2022, as regards SJM Holdings Ltd and MGM China Holdings Ltd, their licenses to conduct business expire in March 2020.

“We think that once this uncertainty is eliminated, it will have a much greater positive impact than any potential for higher taxes or new competition,” - the note says.

The Macau Gambling Law states that existing licenses may be renewed for a maximum of five years from the date of their initial expiration. But as soon as the period of validity of the agreement on the gaming concession expires, any new one must be provided through an open tender. In this sense, as gambling lawyers who are familiar with this issue report, in the context of Macao there is no such thing as an “extension of the concession”.

Praveen Choudari, Jeremy Ahn and Thomas Allen (analysts from Morgan Stanley) believe that decision to renew the license next year could have a devastating effect on the prices of shares of gambling companies in Macau. But even the worst result for licensees can have only minimal effect.

The stockbroker presented two scenarios for the development of events, both of which he considers possible, but unlikely.

"We believe that the Macau government may impose a one-time fee or a permanent income tax at a higher rate than the current 39%."

In another, more pessimistic scenario, the existence of gambling companies is under threat.

This may mean either a partial loss of a license, or competition from a new participant,” - the expert explained.

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