Macau’s market value will increase by 24% over the next two years to US$146 billion, according to Morgan Stanley analysts – but the base-case estimate could be heavily impacted by the impending license re-tendering process and potential threats from Japan and Hainan.
According to a Monday morning note, Macau’s market value is set for significant growth from its current US$118 billion through 2020, driven by a 13% revenue growth CAGR. However, key disruptions remain a concern with analysts warning of downside of up to 41% on their base 2020 estimate and up to 27% on the current market cap of US$118 billion.
Among the key disruptions will be the license re-tendering process with the gaming concessions of MGM and SJM set to expire in 2020 followed by Sands, Melco Resorts, Wynn and Galaxy in 2022.
“In case of license renewal, it could either have a negative monetary impact or outright loss of gaming profit,” Morgan Stanley said.
Analysts also predicted Japan and Hainan could pose a far greater threat than current competition from locations such as Manila and Singapore.
“Competition from ASEAN gaming destinations has grown, yet the market remains too small compared to Macau,” analysts said. “With the potential opening of Japan and Hainan, the pie could shrink meaningfully.”
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