Macau’s gaming regulator (DICJ) will still have 482 gaming tables up its sleeve to allocate as it sees fit once SJM completes the “Big 6 development cycle” with the launch of Grand Lisboa Palace next year.
That’s the equation put forward by boutique investment bank Union Gaming in a comprehensive summary of Macau gaming table allocations, which formed part of a Tuesday note titled “Macau pipeline in pictures.”
Providing a detailed outline of the major developments in Macau over the next few years, Union Gaming calculates that there are currently 657 tables remaining under the government’s table cap following the allocation of 125 tables to MGM Cotai in February.
MGM Cotai’s opening leaves SJM as the only one of Macau’s six concessionaires yet to finish its Cotai integrated resort but recent table allocation trends suggest there will still be plenty remaining following the completion of Grand Lisboa Palace.
“Under the assumption that SJM also gets an initial batch of 100 tables for Grand Lisboa Palace in 2019, and that the government allocates ‘catch-up’ tables to MGM and SJM after the license situation is finalized, this would leave 482 tables in the government’s inventory,” reasons Union Gaming analyst Grant Govertsen.
The government announced in 2012 the implementation of a table cap that would run for 10 years and allow for 3% compound annual growth rate in the number of tables available to the entire Macau casino market. Although it provided no definitive numbers at the time, Govertsen calculates that the 5,500 tables operating in Macau in 2012 means up to 1,892 new tables could be issued through 2022.
At present, only 1,235 of those have been allocated, leaving 657 still available. Even accounting for SJM’s likely allocation – and assuming that MGM and SJM will be awarded another 75 tables combined as part of a “catch-up” allocation by 2020 – that still leaves 482 tables potentially available.
One company that could benefit significantly from the remaining tables is Galaxy Entertainment Group, which is well into the construction process for both Phase 3 and Phase 4 of Galaxy Macau. Due to start opening from late 2019, Galaxy’s new phases will add another 4,500 hotel rooms as well as more gaming floor space to its already substantial holding.
As a result, Union Gaming has raised its future estimates for GEG to a new 1Q18 EBITDA estimate of HK$4.3 billion, up from HK$4.1 billion, and a new 2018 estimate of HK$17.5 billion, up from HK$17 billion. The new new 2019 EBITDA estimate is HK$19.3 billion, up from HK$19 billion.
“In a nutshell, Galaxy is under-supplied in terms of room count and the addition of more room product will be a material driver of earnings for the company over the medium and longer terms,” Govertsen said. “The fact that Galaxy has so much developable land is one of the reasons we remain bullish on shares.”
