Genting aims to upend Macau casino landscape in bidding war

HONG KONG - Malaysian group Genting has emerged as a strong contender to unseat an incumbent Macau casino operator for a new licence, analysts and executives say, unleashing possibly the biggest shake-up in the world's largest gambling hub in over two decades.

Only six slots will be available for the seven applicants, Macau's government has said, as Genting Malaysia goes head-to-head with Sands China, Wynn Macau, Galaxy Entertainment, MGM China, Melco Resorts and SJM Holdings as their concessions expire at year end.

Headed by Malaysian Chinese billionaire Lim Kok Thay, Genting has casinos globally including in Malaysia, Singapore, the United States and Britain. It does not currently operate in Macau.

The stakes are high for Macau and the six gaming firms, which have operated in the Chinese special administrative region since 2002.

If one of the incumbents loses its licence, it is likely to send tremors throughout Macau's gambling industry as the companies have collectively invested more than US$50 billion (S$72 billion) in the past two decades, are tied closely to the economic fortunes of the former Portuguese colony, and employ tens of thousands of people.

It would cause "far too much disruption" if any of the six operators were replaced, said Daiwa analyst Terry Ng in Hong Kong, although other industry watchers noted that the incumbents had left themselves vulnerable to an operator like Genting, which lost out on a Macau licence in 2002.

Genting's strong non-gaming track record, including operating two of the largest theme parks in South-east Asia, would be a big draw for Beijing, which has been urging Macau to diversify away from gambling and attract foreign tourists.

The Malaysian group's multiple non-gaming investments in China, including a prominent ski resort that was used for the Beijing 2022 Winter Olympics, are also likely to bolster its chances, analysts said.

Genting has been more successful at generating non-gaming revenue. In 2019, around 35 per cent of total revenue at its Singapore property came from non-gaming versus 10 per cent to 20 per cent for Macau casinos.

The Covid-19 crisis exposed Macau's over-reliance on gaming, which analysts say underline the urgency to diversify as many of the incumbents are still struggling to recover.

Macau, the world's biggest gaming hub by revenue, raked in US$36 billion in gambling revenues in 2019 - six times the Las Vegas Strip, before Covid-19 decimated it by 70 per cent to US$10.8 billion in 2021.

Genting can offer the Macau government whatever it expressly said it wanted, versus the incumbents who have predominantly focused on Chinese VIPs, said Mr Samuel Yin Shao Yang, an analyst at Maybank. Around 90 per cent of Macau's visitors come from Greater China.

"(Macau casinos) have been told over and over again to focus less on Chinese VIPs and more on non-gaming, but they pretty much paid lip service to that idea. So now... they have to really make a hard divert to that philosophy," Mr Yin said.

In recent years, Beijing has cracked down on the junket industry that facilitated the Chinese VIPs, with the clampdown intensifying last year.

Genting, which has a 40 per cent stake in developing a Macau hotel, could displace or enter into a joint venture with one of the financially weaker players such as SJM, some analysts said. However, it is unclear how this would work, including how Genting would manage unfamiliar resorts and staff.

Genting's properties are back to pre-Covid-19 business, while it remains a hard grind for the incumbents.

SJM, for instance, posted negative cash flow of HK$1.8 billion (S$328.6 million) from operations in the first six months versus Genting Malaysia's positive cash flow of HK$1.5 billion.

While it is unclear how quickly Macau can recover from stringent coronavirus rules, pent-up demand is strong and the long-term outlook is not a worry, said Morningstar analyst Jennifer Song.

A shortened licence period of 10 years from 20 years is also not a problem, Ms Song said, as the government would reallocate facilities and resources to Genting if it won a licence, so it does not actually need to build everything from the ground. REUTERS