Casino actions Las Vegas Sands Corp. (NYSE: LVS) and Wynn Resorts, Limited (NASDAQ: WYNN) have experienced huge success over the past month, and much of the sale is linked to the uncertainty surrounding the renewal of their Macau casino licenses and an ongoing review of the Casino Act. games that could increase regulatory oversight of Macau properties.
License renewals: The changes discussed in Macau include shortening the term of Macau concessions or licenses. Macau’s six current concessions will expire in June 2022.
In addition, the local government is considering raising the local casino ownership requirement above its current minimum of 10% and placing limits on shareholder returns. There may also be more direct government involvement in casinos and more scrutiny of criminal activity and casino employees.
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Bank of America analyst Billy Ng recently hosted a panel discussion with industry insiders to discuss Macau’s license renewal process. Ben lee, managing partner of Igamix Management and Consulting, said local operators in Macau are not surprised by the proposed changes. He said local officials have been discussing these types of changes for years now.
Lee said he believes Macau casinos will be required to have government representation on their boards. While this portrayal likely won’t have a major impact on the casinos’ day-to-day operations, Lee says it could negatively impact their marketing in mainland China.
David Green, CEO of Newpage Consulting, said it was still possible for the government to decide to extend the current gaming licenses in Macau for a few years, as long as that decision comes before the December 26, 2021 deadline.
Lee said foreign brands, such as Wynn and Las Vegas Sands, could be at a disadvantage in Macau if they fail to find a local partnership to help them meet a 10% local ownership requirement.
The two experts agreed that local gambling tax rates would likely remain unchanged.
Visit numbers: As investors agonize over license renewals and gaming law changes, local COVID-19 outbreaks are also devastating Macau’s gaming market. Visits to Macau in August were up 80.2% year-on-year, but down 48% from July.
On Thursday, Ng said much of Macau’s risk was already embedded in shares of Las Vegas Sands and Wynn after their massive selloffs in recent weeks.
“We consider the correction to be excessive and the sector is now trading at 8.8x 2022E EV / EBITDA, which is 2SD below its long-term average,” Ng said.
Bank of America has a neutral rating and price target of $ 55 for Las Vegas Sands and a neutral rating and price target of $ 105 for Wynn.
Benzinga’s point of view: Earlier this month, Wells Fargo recommended that gaming investors avoid Macau for now in favor of casino stocks with exposure to Las Vegas and the US online sports betting and iGaming markets. Wells Fargo named MGM Resorts International (NYSE: MGM) his first overall pick of gaming stocks.
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