Licence to Thrill
Investment cycles are so short nowadays that it’s easy to look an Asian casino gift horse in the mouth
on the one hand, Hong Kong-listed Macau gaming operator Galaxy Entertainment Group gets lambasted by more aggressive analysts for an underperforming share price. On the other hand, the same company is held up by more thoughtful analysts as an example of a stock with huge potential. Owning a licence for land-based casino operations in the world’s biggest single gambling market by volume is certainly a rare and precious thing.
It reminds Inside Asian Gaming of a line from fictional mafia boss Tony Soprano in an episode of the HBO TV hit series ‘The Sopranos’. Tony says his father advised him: “Get into land, ‘cos God ain’t making any more of it”. Something similar could be said currently of Macau casino gaming concessions.
Macau licences are not only rare—they are likely to stay that way in the foreseeable future. The Macau government indicated recently it has no plans to issue any more. This is despite the fact that technically, following the 2001 regulation heralding market liberalisation, 2009 was supposed to be the first year that the concession regime instituted in 2002 could come up for review.
With a gaming revenue ‘pie’ growing again at 22% year-on-year in the third quarter of 2009, it would take an extraordinary foul up by one of the six currently licensed market players not to benefit from this generally rising market.
Actually, Tony Soprano was wrong on the land thing. The Good Lord does make more land—albeit slowly, in the form of volcanic and seismic activity. And Cotai itself has been made by people—by dint of mud and earth dredged from the bottom of the surrounding Pearl River Delta.
Although it seems unlikely at present that Macau will be ‘making’ any more gaming operation licences, it cannot be ruled out completely in a system that arguably lacks the degree of transparency, consistency and predictability built into the Singapore licensing system.
Even if Macau does get busy on the licensing front, however, it is still likely to be wedded to the principle of oligopoly—i.e., a monopoly split several ways—rather than the Las Vegas principle of open market access for anyone with the money and the level of probity required by the regulator. If the Macau oligopoly is to grow, it is only likely do so by modest increments that reflect the growth of the gaming pie itself.
