The impending closure of the bidding window for Macau gaming concessions on Wednesday has been credited as the likely cause of casino stocks showing some upward momentum this week.
In a note, JP Morgan analyst DS Kim pointed to across the board stock price increase of between 2% and 7% for the six concessionaires despite the absence of any clear reason for the rise.
Most likely, he said, were local media reports around the submission of concession bids under Macau’s re-tender process, with the bidding period drawing to a close at 5.45pm Wednesday. Wynn Macau became the first concessionaire to publicly confirm submission of its bid on Tuesday, with the other five all expected to follow suit in the coming hours.
“Frankly, the news shouldn’t surprise anyone as the 48-day bidding window is due to close [Wednesday] and the participation of all six incumbents was a given,” Kim wrote.
“That being said, the news may have been a good reminder for some investors of how close we are towards the end of the (protracted) license renewal process, we think.”
Less likely to have driven stocks north is the resumption of the Macau-Shenzhen ferry service, suspended since 12 August.
“This news doesn’t seem meaningful to us … since the ferry only accounted for about 3% of Macau’s visitors since the COVID outbreak,” Kim continued. “The restrictive border/visa policy is likely to continue to weigh on cross-border travel/gambling demand, in our view, including the upcoming National Day holiday.”
In referencing the closure of concession bids this afternoon, Kim echoed industry sentiment that, while all six concessionaires will submit a bid, it would surprise if any other bidders joined the party given the suppressed nature of the market due to COVID-19 and uncertainty around if or when circumstances might improve.
“Our base case has been – and still is – that all six incumbents will get their licenses renewed without major disruptions,” he said.
“In fact, we’d be surprised if there was any (competent) bidder outside the six incumbents, as the current environment makes it very challenging for new entrants (who don’t have existing non-gaming facilities) to make proper returns during [the shorter 10-year] concession period, in our view. Time will tell.”
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