UAE Approves First Lottery, Could Set Stage for Wynn Casino

Posted on: July 29, 2024, 04:27h. 

Last updated on: July 30, 2024, 09:59h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Over the weekend, the General Commercial Gaming Regulatory Authority (GCGRA) — the United Arab Emirates’ (UAE) first gaming regulatory agency — approved a lottery license for an Abu Dhabi-based company, stoking speculation that move could pave the way for casino gaming in the Emirates.

The GCGRA, which was formed last September and chaired by former MGM Resorts International (NYSE: MGM) CEO Jim Murren, granted a lottery license to The Game LLC. The company is a unit of closely held Momentum and is expected to offer lottery games under the UAE Lottery brand.

In a note to clients on Monday, CBRE Institutional Research analyst John DeCree said the Abu Dhabi lottery approval is a “key marker and potential sentiment-changer” that brings “validity and transparency” to UAE’s gaming regulatory process. He added the lottery acceptance could “further alleviate skepticism in the investment community regarding legalized commercial gaming in the UAE.”

UAE Lottery Could Be Positive for Wynn

It’s been more than two years since Las Vegas-based Wynn announced plans for the UAE casino hotel, and while the company is a minority investor in the project, some analysts view it as a potential long-term driver of earnings and revenue for the operator.

On the other hand, analysts have also argued that Wynn’s share price doesn’t reflect the UAE opportunity because casino gaming hasn’t been approved there. The shares closed higher by 1.09% on Monday. Although UAE regulators haven’t officially approved casino gaming, Wynn Al Marjan Island is already under construction, targeting an early 2027 opening. The hotel tower could be topped off as soon as late 2025. Even without formal confirmation that casinos will be allowed, the UAE is widely seen as one of the best international expansion avenues for the industry.

The UAE is still the next gaming frontier. We continue to believe the UAE is one of the most attractive global gaming opportunities today,” observed DeCree. “The GCGRA is staffed by well-known and experienced gaming veterans and has been working expeditiously to craft industry-leading regulations, which are now becoming visible.”

Further adding to the allure of the UAE for Wynn and its investors are at least two factors. First, should the GCGRA soon approve casino regulations, Wynn would likely have a multiyear monopoly on casino gaming in the UAE because its project is the closest to being ready. Second, the operator previously told investors Wynn Al Marjan Island could generate as much as $600 million in annual earnings before interest, taxes, depreciation, and amortization (EBITDA) when fully ramped.

UAE Casino Licensing Could Look Like Las Vegas

DeCree added that a takeaway from the lottery approval is, should casino gaming be permitted in the UAE, the licensing renewal process will be “administrative in nature,” implying that the model will be more like what is seen in Nevada and less like the concession model employed by Macau and Singapore.

If this is the case, we believe public investors could assign higher valuation multiples to UAE commercial gaming operations relative to jurisdictions with less predictable or more competitive renewal procedures,” added the analyst.

That would likely be attractive to operators, including Wynn, because in Nevada, there’s little effort surrounding license renewal, but in Macau, permits need to be renewed at regular intervals with the government often seeking great concessions with each renewal.