Sands China and Wynn Macau are the concessionaires most likely to be impacted by a requirement for operators to notify the Chief Executive of major financial decisions, potentially including the payment of dividends.
According to a Thursday note from Credit Suisse following publication of an “opinion letter” by the Second Standing Committee of the Legislative Assembly on the final draft of Macau’s amended Gaming Law, dividend payments remain in limbo given a clause in the law requiring operators to inform the Chief Executive of any major financial decisions that exceed a specified percentage of a concessionaire’s equity.
Those financial decisions, Credit Suisse argues, could include dividend payments, although the actual percentage in question is unknown.
Should this be the case, analysts Kenneth Fong, Lok Kan Chan and Sardonna Fong suggest that Sands and Wynn would fall into the high end of dividend/equity percentage based on historical numbers and this would potentially require them to notify the Chief Executive if they were to maintain a similar payout under the new rule. Most of the other operators, they add, are relatively low in this area and should be able to maintain a similar payout ratio.
“There is still uncertainty over the dividend payment in the medium term,” they write. “As capex completes, the operators would likely step-up dividend payment. As such, the percentage of dividend to the net equity may go higher going forward.
“Even though the regulation only requires a notification to the Macau Chief Executive, we think investor concern on whether it could imply an implicit control over future dividend payment would remain.”
As reported by Inside Asian Gaming, the final draft of the new Gaming Law also reveals an effective 1% increase in government levies on gross gaming revenues.
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