Casino Stocks Roar As Macau Government Extends Gaming License

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Casino Stocks Roar As Macau Government Extends Gaming License

The measures that are supposed to tighten the government control over the gambling industry in Macau are slowly starting to take shape. Macau will issue a maximum of 6 gambling licenses that be valid for up to 13 years. New measures will also limit the public float of casino operators.

Current Casino Operators Likely to Retain Their Licenses

The new licenses will initially be granted for 10-year periods. According to a government briefing held on Friday, the license duration may be stretched for an extra three years. Macau administration will also ensure that the local ownership in Chinese casino companies increases from the current 10% to 15% in the future. Before it’s put into effect, the new bill will first have to be approved by the local legislature. However, according to the reports, it’s all but certain that it will pass. Macau local legislators almost never vote against the government proposals.

The government announcement on new licenses brings a sigh of relief after some uncertainties over the last few months. The current licenses were set to expire in June and some operators found themselves were anxious as there were talks of much stricter norms and the possibility of some companies being pushed out of Macau. However, this news means that the six current Macau casinos will likely get their licenses renewed.

The Introduction of the Public Float Cap

Still, the announcement that the new regulation will include capping public floats comes as a surprise. This move was not included in any of the earlier proposals. The impact of the new regulations is yet to be seen. Even though the public floats will be maxed at 30%, according to the officials this rule will only apply to casino license holders. The six companies that currently operate Macau casinos have their licenses in the name of their subsidiaries and not their listed arms.

The cap on the public float is supposed to increase the control government has over the casino industry in the region and ensure healthy development. According to the Chief of Macau’s Office of the Secretary for Economy and Finance, Ku Mei Leng, it will not limit market freedom.

Related: (Macau May Be The Home For China’s Central Bank Digital Currency)

Good News for Investors

The new regulations even seem more lenient than expected. This will certainly please the investors in stocks of US-listed casinos that operate in Macau. The government apparently withdrew some of the more unpopular proposals. For example, there will be no government representatives on casino boards. The finished proposal should provide some relief to the local casino industry which has been hit hard by the Covid-19 pandemic and China’s increased control over its gray market practices. Just in last year, the index of Macau casino operators took a 47% dive.

Increasing Potential Returns At Macau Casinos

New measures which include 10-year licenses should encourage further investment and increase potential returns. The cap on the public float will help the government clamp down on illegal practices such as money laundering and limit capital outflows. At the moment, there are no plans to adjust the taxation on casino operators. The companies that run the casinos currently pay 40% of their gambling revenues as taxes.

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Casino Stocks Roar As Macau Government Extends Gaming License
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Casino Stocks Roar As Macau Government Extends Gaming License
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