The Macau Legislative Assembly signed the final draft of the new Macau gaming law this week.
Bank of America analyst Billy Ng says there's nothing in the legislation that dampens his long-term bullish thesis on the Macau gaming market.
Draft Updates: The final draft of the law includes the following changes:
- Establishes a minimum gross gaming revenue (GGR) requirement per gaming table and slot machine.
- Allows satellite casinos to continue to operate under a management fee, but they cannot participate in the profit-sharing or commission agreement with the gaming concessionaires.
- Concessionaires and shareholders owning at least 5% of the companies may not hold the capital of other concessionaires directly, but can hold up to 5% indirectly.
- Concession-holding entities cannot be listed publicly.
- Chief executives can waive up to 5% of the GGR tax if the concessionaires bring in overseas customers from outside of China.
- Concessionaires must maintain a minimum of $5 billion Macanese pataca (MOP) throughout the license period.
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Ng said Friday the changes were mostly in-line with expectations, and investor sentiment should improve once the gaming law is finalized.
"We believe the current proposed set of laws provides an environment that allows operators to maintain their previous profitability and return if the demand is still there," Ng said.
How To Play It: Bank of America has the following ratings and price targets for U.S.-listed Macau operators:
- Melco Resorts & Entertainment Ltd (NASDAQ:MLCO): Buy rating and $12.20 target.
- Las Vegas Sands Corp. (NYSE:LVS): Underperform rating and $38 target.
- Wynn Resorts, Limited (NASDAQ:WYNN): Neutral rating and $75 target.
- MGM Resorts International (NYSE:MGM): Neutral rating and $45 target.
Benzinga's Take: The gaming law and license-issuing process will eliminate uncertainty for investors, but Macau is facing other difficulties in its underlying business. China's Zero COVID policy and related lockdowns have significantly impacted Macau's business, and GGR levels remain well below pre-pandemic levels.
Photo: Zen S Prarom via Shutterstock
