Public consultation on gambling law clarified some investor concerns – Analysts
Some of the issues surrounding the future revision of the gaming law that are of greatest concern to investors have been clarified to some extent by officials of the Bureau of Gambling Inspection and Coordination (DICJ) during public consultation sessions, have estimated game analysts.
After the public consultation document was revealed by authorities in the Macao SAR on September 15, the shares of the six gambling operators plunged 30% amid fears about increased oversight of operations by government delegates, a increased local shareholding and monitoring of dividend distribution. .
The public consultation – which ended on October 29 – held a session reserved for game industry representatives on September 20 and four-day consecutive sessions for the general public between October 22, 23, 24 and 25. , with analysts and investors expecting the sessions to provide some clues as to the authorities’ true intentions.
The consultation document identifies the main elements under consideration, namely, social responsibility; non-gaming development; strengthening government surveillance and strengthening penalties for violations.
Fewer than 360 people attended the sessions, with a total of 73 people and representatives of associations speaking, with participants in the consultation sessions including private citizens, representatives of gambling and second-hand operators. , workers in the gaming sector, representatives of the social services sector, the legal sector, the education sector, associations, among others.
For the most part, the representatives of the DICJ present at the sessions, which included the director Adriano Ho and the deputy director Lio Chi Chong, limited their interventions to brief explanations of the consultation document, call for tabling more suggestions, with little statements outside these spheres.
“On the whole, the government has been largely silent in its views, but some clarifying comments have been made,” analysts at Sanford C. Bernstein said in a dispatch.
One of those clarifications concerned the figure of the government representative, a concept that the DICJ highlighted is already regulated by current law and which, if named in concessions, “will not affect business operations.”
“The DICJ clarified that they were not introducing a new law because the government representative is governed by law 13/92 / M, which is not new and was the situation of SJM / STDM before 2002 (when ‘she was a monopoly operator in Macau) and in Jockey Club in Macau. We believe this should mean less disruption to the operations of operators, ”Morgan Stanley said in a note.
Another issue in dispute concerned a suggestion in the document that the distribution of profits to shareholders by dealers – whether in cash or in shares – would not be permitted without fulfilling specific conditions set out for that purpose and obtaining the prior authorization from the Government of the Macao SAR.
“Several Macau lawyers have questioned the Macau government’s right to distinguish gambling operators with limitations on dividends,” Bernstein noted, with some legal experts previously noting that Macau’s current legal framework does not include provisions that would allow the government to control how dealers issue dividends as proposed.
“The DICJ clarified that the purpose of the dividend restrictions is for operators to use their profits to help Macau diversify its economy, confirming our view that Macau does not ban dividends altogether. They will be allowed to pay dividends as long as they have invested a certain amount in activities other than gaming in Macau, ”Morgan Stanley added.
The Gaming Law Revision Bill also suggests that the management of dealerships be mandatorily delegated to a general manager who is a permanent resident of Macao SAR and owns at least 10 percent of the dealer’s share capital.
In one of the sessions, the Deputy Director of the DICJ, Lio Chi Chong, remarked that this rule is “already regulated in the current law on games”, which apparently implies that there would be no no practical change in the application of the law on share capital, although the percentage itself can be increased.
“Currently, a 10% stake is held by a local person (referred to as MD) at the co-project level. The person has the right to vote but no economic right. Investors feared this would result in a sale of shares at listco level. The DICJ clarified that it is not changing the structure, but that the goal is to increase the stake by 10 percent but that there will be no disruption in ListCo’s operations, ”added Morgan Stanley.
Meanwhile, analysts at Bernstein said the local government has made it clear that it wants the game dealership to focus its investments and operations on Macau, with one of the reasons cited for the increase being to better verify ” convenience ”of these shareholders.
The brokerage said Macau games shares were up 2-5% after DICJ clarifications and improved game results and visit count.
“We remain constructive on the sector because we believe that the regulatory risk is lower than what the market evaluates”.
After Zhuhai removed quarantine requirements on arrivals from Macau on October 19, the number of daily visits returned to numbers similar to the first half of this year, between 20,000 and 30,000, with game volume daily which is expected to reach 140 million MOP per day.
Yet the impact of recent outbreaks has led October to declare this year’s lowest monthly results so far, around MOP 4.3 billion.
Once the gaming law review is complete, authorities will have a maximum of 180 days to present a final report to the public, after which a draft will be submitted to the Legislature for further discussion.
Analysts also expected Macau chief executive Ho Iat Seng to provide further clarification during his political speech for 2022 on November 16 or the next day at a plenary meeting of the Legislature, to explain. government policy agenda and answer questions from legislators. .
“It is possible that the government will give some additional clarifications concerning the revision of the law on games during legislative meetings. The next steps would be for the government to provide the results of the public consultation process and then submit the revisions to the gambling law to the LA. It’s possible that will happen later this year or early next year, ”Bernstein added.
“Once the laws are changed, the government can go through a bidding process on concessions and issue new concessions. This process could probably take a few months. Thus, it is possible that the entire revision of the Gaming Law, the legislative process and the process of issuing concessions will all take place before June 2022.
The brokerage, however, warned that the Macau general manager could still extend the existing concession, but if it did, such an extension would likely be relatively short, a year or less, if necessary.
Current concessions expire in June 2022 but may still be extended. Under current law, Macau’s gaming concessions can each be extended for up to five years.