Genting Macau Hopes Dashed, But Not Dead

Posted on: November 28, 2022, 05:58h. 

Last updated on: November 28, 2022, 06:40h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Genting Malaysia’s hopes of procuring a Macau gaming license were dashed over the weekend, as authorities in the special administrative region (SAR) awarded provisional permits to the six established concessionaires. But some analysts believe there are still ways the company can enter the Asia-Pacific casino hub.

Genting Macau
Part of the Cotai Strip in Macau. Genting can still find a way into Macau, according to analysts. (Image: YouTube)

Genting surprised the gaming industry in September when an entity tied to the Malaysian conglomerate became the seventh bidder for a Macau gaming permit. It joined the six established operators — Galaxy Entertainment, Melco Resorts & Entertainment, MGM China, Sands China, SJM Holdings, and Wynn Macau — all of which won provisional extensions of their licenses.

Macau’s new gaming laws provide for six concessionaires, so it’s not necessarily surprising Genting was left out in the cold. But that doesn’t mean it lacks for options.

We think they might still want to participate via equity or joint venture investment if [the] prices are right and the government is okay,” noted JPMorgan analyst DS Kim.

Analysts acknowledge that the licenses awarded over the weekend are provisional, meaning hope burns eternal for Genting. But it’s faint at best.

Genting Had Difficulty Setting Itself Apart

While the broader Genting Bhd. conglomerate is one of the largest integrated resort operators in the Asia-Pacific region — with a portfolio including the famed Resorts World Sentosa in Singapore – the company appears to have encountered difficult setting itself apart from the established Macau concessionaires.

“While we acknowledge Genting is a world-class casino operator, so are the six incumbents. Our view has always been that Genting does not possess any attributes that are outright superior versus the incumbents that would justify a change,” wrote Citi analysts George Choi and Ryan Cheung in a note.

Over the course of the retendering process, Genting’s bid was seen as credible due in large part to the company’s proficiency with nongaming amenities, which have become a point of emphasis with Macau authorities. However, the established operators in the SAR are pledging north of $12 billion to nongaming offerings, meaning that was another avenue essentially closed off to Genting.

“Having looked at Genting Malaysia’s share price performance since it announced its participation in the Macau gaming license tender in mid-September, we believe the market never thought it had a serious chance,” according to the Citi analysts.

How Genting Can Get Into Macau

For now, it appears likely the provisional licenses will turn into the expected 10-year permits. But that doesn’t mean Genting is out of options for entering the SAR.

As noted above, analysts believe Genting can establish a Macau footprint via a joint venture or by providing capital to a financially strapped operator. On the latter front, speculation has widely centered around SJM Holdings. Macau concessionaires are facing spending obligations. But it remains to be seen if they need outside assistance to meet those requirements.

“The only known unknowns are: minimum investment requirements for the next 10 years (we estimate US$2 billion to US$3 billion+ per operator, with bigger operators such as Galaxy/Sands spending on the higher ends; see our note), which we expect to be fairly reasonable; and annual concession premium (vs. currently ranging from US$15 million to US$45 million, subject to the number of tables/slots), which we also expect to change incrementally and reasonably,” noted JPMorgan’s Kim.