Forensic Analyst

Jason Yap, CFA

Forensic Accounting

Macau's top gaming stocks <a href="https://www.straitstimes.com/business/companies-markets/macau-casinos-see-188-billion-wipeout-as-china-tightens-control" target="_blank" rel="noopener">lost</a> a record USD18 billion in combined market value on 15 September 2021 after the Macau administration <a href="https://www.ggrasia.com/public-consultation-re-gaming-law-review-from-sept-15/" target="_blank" rel="noopener">announced</a><a href="https://www.ggrasia.com/macau-may-end-casino-sub-concessions-directly-monitor-ops/" target="_blank" rel="noopener"></a> a 45 day public consultation period to discuss revisions to Gaming Laws, which comes as the June 2022 expiration deadline for existing gaming concessions loomed. Amongst others, the abolishment of the sub-concession framework (which could reduce current 6 operators to 3 operators), restriction on distribution of dividend, and Macau government's direct supervision of casino operations drew the most consternation from investors and analysts. The sweeping revisions compound the woes of Macau's casino operators, such as <a href="https://www.smartkarma.com/entities/wynn-macau-ltd" target="_blank" data-smartkarma-citation="entities:473:1" rel="noopener">Wynn Macau Ltd (1128 HK) </a> and <a href="https://www.smartkarma.com/entities/sands-china-ltd-088dbd12-a0e9-4516-a68f-6a3cf8aa065d" target="_blank" data-smartkarma-citation="entities:28515:1" rel="noopener">Sands China Ltd (SCHYY US)</a>, which had already been badly affected by pandemic driven travel restrictions, and which obliterated their gaming revenues.While there were some improvements due to easing of travel restrictions for Mainland travelers in September 2020, gross gaming revenues (GGR) remain a shadow of its past.  The daily average of visitors to Macau during October's Golden Week was <a href="https://www.ggrasia.com/macau-oct-golden-week-daily-average-visits-dip-93pct-y-o-y/" target="_blank" rel="noopener">down 93.7%</a> on daily average in 2020. The decline coincided with new COVID-19 cases confirmed in Macau around the same period. Amongst its peers, <a href="https://www.smartkarma.com/entities/wynn-macau-ltd" target="_blank" data-smartkarma-citation="entities:473:1" rel="noopener">Wynn Macau Ltd (1128 HK)</a>  is the most highly levered and had already dodged a bullet by securing covenant waivers in April 2020 at the peak of the pandemic.In this Insight, we discuss the impact of the proposed revisions and subdued GGR recovery on <a href="https://www.smartkarma.com/entities/wynn-macau-ltd" target="_blank" data-smartkarma-citation="entities:473:1" rel="noopener">Wynn Macau Ltd (1128 HK)</a>'s cash reserves, debt servicing ability, and whether there may be potential breaches of its financial covenants.

Macau's top gaming stocks lost a record USD18 billion in combined market value on 15 September 2021 after the Macau administration announced a 45 day public consultation period to discuss revisions to Gaming Laws, which comes as the June 2022 expiration deadline for existing gaming concessions loomed. Amongst others, the abolishment of the sub-concession framework (which could reduce current 6 operators to 3 operators), restriction on distribution of dividend, and Macau government's direct supervision of casino operations drew the most consternation from investors and analysts. The sweeping revisions compound the woes of Macau's casino operators, such as Wynn Macau Ltd (1128 HK)  and Sands China Ltd (SCHYY US), which had already been badly affected by pandemic driven travel restrictions, and which obliterated their gaming revenues.While there were some improvements due to easing of travel restrictions for Mainland travelers in September 2020, gross gaming revenues (GGR) remain a shadow of its past.  The daily average of visitors to Macau during October's Golden Week was down 93.7% on daily average in 2020. The decline coincided with new COVID-19 cases confirmed in Macau around the same period. Amongst its peers, Wynn Macau Ltd (1128 HK)  is the most highly levered and had already dodged a bullet by securing covenant waivers in April 2020 at the peak of the pandemic.In this Insight, we discuss the impact of the proposed revisions and subdued GGR recovery on Wynn Macau Ltd (1128 HK)'s cash reserves, debt servicing ability, and whether there may be potential breaches of its financial covenants.

Wynn Macau (1128 HK) - Gaming Law Revisions and Impact on Financial Covenants