Morgan Stanley Expects Macau to Extend Concessions

Morgan Stanley expects the Macau Government to grant extensions to 2025 for its concessionaries due to the economic effects of the COVID-19 pandemic.

Analysts Expect Extension

Morgan Stanley analysts believe that the Government of Macau will likely drop its initial plans to hold an open tender for gaming licenses before June 2022. Instead, the country may instead choose to simply extend the current concessions by up to three years to 2025 as a result of the time pressure applied by the global COVID-19 pandemic, the analysts believe.

The investment bank’s forecast was released on Friday. It was conducted by Morgan Stanley analysts Praveen Choudhary, Gareth Leung and Thomas Allen, who examine the Macau Government’s gambling license renewal plans for the next year and outline their rationale and process.

The analysts point to two cases in particular: SJM Holdings and MGM China. In 2019, the Macau Government granted both SJM Holdings and MGM China two-year extensions – a decision that the analysts believe stems from time limitations. While the move did also put the two companies in line with the country’s four other concessions holders, the country’s lengthy open bidding process was likely the key behind the decision. The preparations for the process could not be finalized before the license expiration, Choudhary, Leung and Allen believe.

“We believe we are in a similar situation due to COVID-19,” the Morgan Stanley analysts said.

Only Logical Choice

According to Morgan Stanley, the rebidding process will likely not take place in the next two years, again due to time constraints. Open bidding necessitates an open consultation, followed by a new law that will have to be introduced into the Legislative Assembly. Given that the draft is not even ready yet, the entire process could take well over a year from beginning to end.

Therefore, Morgan Stanley believes that a three-year extension is the most viable choice as it would buy much-needed time and will still keep all current gaming concessions aligned. Macau Chief Executive Ho Iat Seng can extend existing concessions by a maximum of five years. SJM and MGM will have used two of those extension years by June 2022.

Macau Under Pressure

No matter which decision is made, the analysts are confident that the government will announce its plans in the coming year rather than waiting for 2022. The Macau government will have its hands full in the coming years, so decisive action is necessary and expected, especially given the recent slump in GGR taxes.

The country is under high pressure to adapt to the changing world of gambling if it wishes to prevent a serious economic shock. Macau is planning a series of events for 2021, is looking into ways of boosting its tourism industry, and was even rumored of preparing its gambling system for the e-yuan. However, the Macau government has denied such claims.