Sands China, Wynn Macau Most Affected by Macau Dividend Rule, Says Bank

Posted on: June 17, 2022, 08:30h. 

Last updated on: June 17, 2022, 12:11h.

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

Under Macau’s new gaming law, concessionaires need to notify Chief Executive Ho Iat-seng of plans to pay dividends. Credit Suisse analysts say Sands China and Wynn Macau are the operators most affected by that requirement.

Macau dividends
The Wynn Macau integrated resort. Analysts see Sands China and Wynn Macau encountering dividend headwinds. (Image: Wynn Macau)

The final draft of Macau’s amended gaming law, which could be approved as soon as next week, includes a provision requiring the six concessionaires to notify Ho of any major financial moves that exceed a certain percentage of operators’ equity, including possible cash distributions to shareholders. The law requires casino companies to hold a minimum of $625 million.

Even though the regulation only requires a notification to the Macau Chief Executive, we think investor concern on whether it could imply an implicit control over future dividend payment would remain,” write Credit Suisse analysts Kenneth Fong, Lok Kan Chan and Sardonna Fong.

Based on payout histories, the analysts estimate that Sands China and Wynn Macau would reside at the higher end of the spectrum regarding payout ratio or a percentage of earnings distributed as dividends.

For Sands, Wynn Murky Dividend Outlooks

Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) — the US-based parents of the aforementioned Macau operators — suspended dividends in 2020 due to the coronavirus pandemic, and those actions pertained to the Macau units, too.

Neither company has since restored its quarterly payout. In addition to needing to notify Ho of dividend plans, both Sands China and Wynn Macau would need consent from creditors to resume payouts.

Needing consent of creditors for dividends following amendments to credit facilities is common in the gaming industry. For example, Las Vegas Sands (NYSE:LVS) said last September that it reworked a lending agreement with creditors last September. As part of that accord, it’s unlikely to restart a cash payout until at least late 2022.

Last month, Wynn Macau announced it amended a $1.5 billion credit revolver, noting it may need permission from creditors to issue dividends.

“The company as guarantor may be subject to certain restrictions on payments of dividends or distributions to the company’s shareholders unless certain financial criteria have been satisfied through the facility agreement,” according to a regulatory document.

Dividend Uncertainty Remains

Las Vegas Sands executives recently signaled they prefer dividends to share buybacks as a method of shareholder rewards. But it’s unclear when that operator, or Wynn for that matter, will restart cash payouts.

“There is still uncertainty over the dividend payment in the medium term,” add the Credit Suisse analysts. “As capex completes, the operators would likely step-up dividend payment. As such, the percentage of dividend to the net equity may go higher going forward.”

Beyond some regional operators, dividends remain out of fashion for casino companies. But share buyback programs are picking up momentum in the industry.