The Macau casino sector saw a major overhang cleared on Saturday with the license renewal process in the gambling mecca.
The government announced that it has tentatively renewed the casino licenses of MGM Resorts (NYSE:MGM), Las Vegas Sands (NYSE:LVS), Wynn Resorts (NASDAQ:WYNN), Melco Resorts & Entertainment (MLCO), SJM Holdings (SJMHHF) and Galaxy Entertainment (OTCPK:GXYEF). A bid from Genting Group of Malaysia (OTCPK:GEBHF) was rejected.
The new licenses are expected to take effect at the beginning of 2023 and run for a maximum term of 10 years. Regulators will negotiate final terms before the licenses go into effect on January 1.
The awarding of the licenses came with commitment from casino operators to help the local economy. “The operation and development of our gaming industry has come to a certain scale today, but there are also some problems,” noted Secretary for Administration and Justice Cheong Weng Chon. “For example, the source of our tourists is too concentrated. It’s not healthy,” he noted.
The casino operators all pledged to help diversify the local economy by investing in non-gambling attractions. Some reports pegged the required investment at $12.5B per casino company.
The Macau government’s requirement to spend on theme parks, music and sports has been noted to add to the financial pressure for the casino operators with gross gaming revenue still down sharply from pre-pandemic levels.
Looking ahead, the six license holders operate a total of 41 casinos in Macau that are running well below target rates due to the COVID restrictions still in place. Macau year-to-date gross gaming revenue was down 50.5% to 35.7B patacas through October 31 and is expected to end the year on a weak note due to accelerating COVID cases in China. The National Health Commission reported 35,183 new COVID-19 infections on November 25, of which 3,474 were symptomatic and 31,709 were asymptomatic. That tally marked a record for COVID cases in the nation.
The latest COVID developments may temper any rally in Macau casino stocks on Monday off the license renewal news. Read a breakdown of next week’s big events that could create share price jolts in Seeking Alpha’s Catalyst Watch.
Image and article originally from seekingalpha.com. Read the original article here.