The Macau SAR Government is likely to abandon plans to hold an open tender for gaming licenses before June 2022, instead extending the current concessions for three years until 2025 due to time constraints brought about by COVID-19, according to investment bank Morgan Stanley.
In a Friday note examining the government’s plans to finalize the license renewal process by next year – therefore allowing for new licenses to be issued by the time current concessions expire in 2022 – analysts Praveen Choudhary, Gareth Leung and Thomas Allen outline their reasoning why such a tight timeline won’t happen.
In particular they point to the two-year extension granted SJM Holdings and MGM China in 2019 which, aside from bringing them into line with the other four concession holders, was also an issue of time, “as necessary preparation for an open bidding process could not be finished before the licenses expired.
“We believe we are in a similar situation due to COVID-19,” they state.
“For open bidding to happen, Macau has to run a public consultation, and then put the new law in the Legislative Assembly (the draft is not ready yet), which could take more than a year.”
As a result, the analysts “do not expect [the rebidding process] to happen in 2021/22 due to the time crunch.”
Morgan Stanley notes that a three-year extension seems most logical given the desire to keep the duration of current gaming concessions aligned. Under Macau Law, Chief Executive Ho Iat Seng can extend each concession by up to five years, however SJM and MGM will have already used up two of those years by the time June 2022 arrives.
Either way, the analysts expect a decision on how the government plans to proceed to be confirmed in 2021 rather than 2022.
“Similar to March 2019 (a year before SJM/MGM’s licenses expired), we expect this decision to be taken by June 2021 – a year before the expiry date in June 2022,” they propose.
Choudhary, Leung and Allen add that any such extension would likely result in all six concessionaires paying a one-off fee for the privilege, similar to the US$25 million SJM and MGM each paid for their two-year extension in March 2019.