According to a note issued by the brokerage, the Chief Executive will likely extend the current concessions by three years, considering the current legislation only allows for a five-year extension and the SJM/MGM China concession was previously extended by two years to match the remeaning concession’s deadline.

One of the reasons Morgan Stanley predicts this outcome is the pace of the process to review the current gaming law and the required steps to prepare the public concession process.

‘The market is hoping that the new gaming bill will be voted in the Legislative Assembly (AL) and the public consultation can be concluded by 4Q21, so the decision on license extension can be finalized by 1Q22 (expiring in June 2022),’ the brokerage noted.

‘For open bidding to happen, Macau has to run a public consultation (earlier planned for 2H20), and then put the new law in the AL (the draft is not ready yet), which could take more than a year’

For Morgan Stanley, if the public consultation is done and the new gaming law is passed in the AL before the third quarter of 2021, it is possible to run an open bid for the gaming license.

However, the brokerage believes it to be more likely that a decision on the extension will be made by June 2021, a year before the expiry date in June 2022, with concessionaires probably required to pay a nominal amount for the extension, as SJM/MGM each paid US$25 million for theirs.

In any case, Morgan Stanley dispelled some possible scenarios for new requirements to be included in the new bidding process, including a gaming tax increase or the impact of a gaming operator being added.

According to the company, since 2002 gaming operators have spent over US$45 billion, added 26,000 rooms, generated cumulative revenue of over US$430 billion, some US$76 billion EBITDA and tax receipts of some US$160 billion.

‘We note that the Macau government collects 38-39 per cent of all gross gaming revenue and received US$14 billion in direct tax in 2019. We do not expect the tax rate to be increased (or changed) meaningfully since the returns on newer casinos have been lower,’ the brokerage added.

As for a 7th or 8th new entrant in the gaming sector, for Morgan Stanley without a ‘big piece of land to go with it’, there will be no competitive threat to the existing players.