Macau casino stocks fall on renewal scare

Stock prices of Macau’s six gaming operators took a hit following reports from Chinese-language media on Wednesday implying that all of Macau’s gaming concessionaires would have to rebid for their licenses through a public tender.

The news was later clarified by Union Gaming in a Thursday note as incorrect.

“This is unequivocally not the case as it relates to both the government having settled on a renewal process and that there will be a competitive rebid,” said the brokerage.

The misrepresentation came about when DICJ director Paulo Martins Chan was asked about concession renewals on the sidelines of the G2E Asia conference in Macau.

“We think a comment made about the Big 6 needing to “apply” for renewal was somehow misconstrued as needing to apply for renewal as part of some upcoming competitive public tender process,” said Union Gaming.

“We note that the concept of the Big 6 operators having to apply for renewal has always been built into the system as the licenses simply don't renew automatically after the end of 20 years.”

Union Gaming says it expects this news, along with any other news with a negative slant to pressure stocks over the short term.

“This is nothing new. The current framework doesn’t expressly foresee any renewal mechanism,” Rui Pinto Proenca, partner at MdME said at an Association of International Gaming Advisors conference.

The current concessions begin expiring in 2020 and can be be extended for two years. The others expire in 2022 and the government can extend for a maximum of five years.

“Once that’s finished technically there is no renewal mechanism...but no one believes that we will get to that point and the government’s going to launch a tender as it did when there was nothing here. But the law does need to be amended and that’s probably the direction of what will happen.” he said.

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