Inside Asian Gaming Vice-Chairman and CEO Andrew W Scott highlighted during a presentation entitled “The Future of Macau Gaming,” in which he analyzed possible forward scenarios for the Macau gaming industry, that “dividends are necessary to move money around through the IR’s corporate structure to fund non-gaming. And the government is saying, ‘We want more non-gaming, please.’ So, ok, the concessionaires need to be able to declare dividends to do that.
“Macau’s casino concessionaires are actually prohibited by law from undertaking any activities other than gaming, so they need to be able to declare dividends to fund other companies within their corporate group structure to undertake the very non-gaming activities the government is asking them to expand upon.”
Speaking at a business lunch yesterday (Wednesday) held at Grand Lisboa Palace and organized by BritCham Macau, Scott’s comments alluded to the controversy generated by the Macau Government after it revealed in a press conference in September some of the proposals in store for the upcoming gaming law revision. The new Macau gaming law, which is currently under legislative development and is to supersede the current law enacted in 2001, is bound to give shape to the industry after new gaming concessions are issued. The existing gaming concessions expire on 26 June 2022, although the government does have the power to extend the concessions for up to five years beyond the original expiry date.
One of the announced plans that shook the sector and triggered a bourse collapse in the listed entities of Macau’s casino concessionaires on 15 September was the possibility of introducing limitations to the distribution of dividends by casino concessionaires to their shareholders, in the form of a provision requiring that the government approve any such dividends. The government has yet to offer any guidance on if and how they would withhold any such approval, other than saying that concessionaires would need to “meet specific requirements in advance” and that the goal of the proposal was to “promote the sustainable and diversified development of Macau.”
Delving into the matter, Scott’s comments stressed the key role dividends plays in the IR’s financial ecosystem. He also said any proposal trying to limit the normal function of the declaration of dividends involved a conflict with other long-established Macau law stipulating the rights of shareholders. “Apart from a provision requiring companies to retain 10% of their profits until a reserve of 25% of their issued capital is accumulated, shareholders are free to distribute dividends as they see fit, as long as this is done under the normal corporate governance provisions of the company.”
He also remarked that the approach to dividends seems to be the only key subject in the government’s Gaming Law proposals “that doesn’t eventually have an answer the industry can live with. We haven’t got clarity on that development yet. But apart from that, all of the points the international investment community had initially been concerned with are okay once you sit down and think them though. And you would think that the government doesn’t want to seriously harm an industry that provides the lion’s share of its taxation revenue each and every year.”
During his presentation Scott broke down threats and challenges laying ahead for the Macau gaming industry, including the aforementioned upcoming Gaming Law, post-pandemic industry development and the industry’s relationship with mainland China.