Sands China would suffer most if new Macau table cap distributed evenly: Morgan Stanley

The Chief Executive announced last week that from 1 January 2023 the total number of gaming tables and gaming machines in Macau will be limited to 6,000 and 12,000 respectively, while the minimum annual gambling revenue required under Article 20 of the new Macau gaming has been set at MOP$7 million per table and MOP$300,000 per machine.

In a note, Morgan Stanley analysts Praveen Choudhary and Gareth Leung pointed out that the 6,000 and 12,000 caps are broadly in line with the 6,006 and 12,042 tables and machines respectively in the market as of 30 June 2022.

But these numbers are still well below 2019 levels – the number of tables under the 2023 cap will be 11% lower than the 6,739 in operation at the end of 2019, while 12,000 machines is 29% lower than 2019’s 17,009.

While the government’s minimum revenue requirement looks “easy to meet”, the analysts noted a lack of clarity on how the caps would be assigned to operators and who may have to forgo some of their current allocation.

Assuming an even allocation of 1,000 tables and 2,000 machines to each concessionaire, Sands China would lose out on both counts with particular downside in the slots segment given it operated around 6,000 machines at end-2019.

According to Morgan Stanley, Sands and SJM would be the main losers in the table games segment with MGM China and Wynn Resorts gaining, while Sands, Galaxy and Melco would all lose slots, leaving SJM, MGM and Wynn with gains.

However, standing in the way of the even allocation theory is the fact that smaller operators like MGM China simply don’t have the space to add a substantial number of additional inventory.

by Ben Blaschke