Macau Casinos Could Be Required to Disclose Major Financial Decisions

Posted on: March 15, 2022, 06:18h. 

Last updated on: March 16, 2022, 11:40h.

Devin O'Connor @CasinoorgDevinO Read More
Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

Macau casinos will be governed by a new set of regulatory conditions next year. One potential governing matter proposed would require the six casino concessionaires to disclose any “major financial decision” to the local enclave government prior to its execution.

Macau casino law gaming China
Macau lawmaker Chan Chak Mo addresses the media. Chan says Macau’s latest draft of its forthcoming gaming law seeks to require casinos to warn the government of any “major financial decision” it plans to make. (Image: Exmoo)

A specially designated committee in Macau’s Legislative Assembly is finalizing the rules that will oversee the six casino operators for a 10-year period, which is temporarily slated to begin January 1, 2023. Committee head Chan Chak Mo told reporters this week that the gaming law bill being analyzed includes mandatory disclosures of any substantial monetary decision the six companies make.

The gaming draft defines a “major financial decision” as one that is equal to or higher than the total capital investment that the company has pledged to make in Macau.

The current version of the casino law says licensees face a fine as high as MOP5 million (US$620,400) in the event of failing to disclose such an expenditure. Asian gaming media outlet GGRAsia broke the news of the proposed financial stipulation.

Not About Dividends

Macau casinos are expected to agree to substantial new capital investments in exchange for fresh tenders. That seems to be par for the course in recent years in Asia.

In Singapore, for example, Las Vegas Sands and Genting Group agreed to each further invest $3.3 billion into their integrated resorts in exchange for their continued duopoly.

Macau lawmakers earlier this month decided to extend the six casino licenses from their scheduled June 2022 expirations through December 31, 2022. The extension was because of legislative interruptions caused by COVID-19.

Macau officials say the “major financial decision” clause is to assure that each casino has the financial capacity to fulfill its pledged investments outstanding. Chan said the item is not to intrude with the inner workings of the six firms.

The government does not mean to interfere in any normal course of business,” Chan said. But when it comes to dividends, the law is unclear whether a company would need to first notify the Macau Gaming Inspection and Coordination Bureau as to its plans to issue shareholders such a reward.

Though Las Vegas Sands suspended its dividend amid the pandemic, the company has a long track record of issuing such annual disbursements. In 2019, Sands returned $3 billion in dividends to shareholders.

A stock dividend is a payment to shareholders that is made in shares rather than cash.

Capital Contraction

It’s been a dismal two years for the six casino operators in Macau. Gross gaming revenue (GGR) went from $36.4 billion in 2019 to just $7.5 billion in 2020. Last year was slightly better, with casino win totaling nearly $10.9 billion.

The great decline in gaming win was initiated by the pandemic. China’s zero COVID policy has prevented a robust recovery. The market is further jeopardized by Macau and Beijing’s crackdown on VIP junket groups. And then there’s the 10-year license term, half of the 20-year durations the initial licenses ran.

The combination of factors could lead to the six companies being a bit more conservative in hyping the sort of investments they would make into their properties with the fresh 10-year tenders.

“It’s really difficult, if not impossible, for new projects starting after the concession to get payback within the period,” JPMorgan analyst DS Kim explained of the problem with committing significant capital to new projects.