Signage of Genting Malaysia’s Resorts World is displayed at its complex of casino, hotel and entertainment park in Genting Highlands, Pahang, Malaysia on Sept 16, 2022. (HASNOOR HUSSAIN / REUTERS)
HONG KONG – Malaysian group Genting has emerged as a strong contender to unseat an incumbent Macao casino operator for a new license, analysts and executives say, unleashing possibly the biggest shakeup in the world’s largest gambling hub in over two decades.
Only six slots will be available for the seven applicants, Macao’s government has said, as Genting Malaysia goes head-to-head with the six concessionaires Sands China, Wynn Macau, Galaxy Entertainment, MGM China, Melco Resorts and SJM Holdings as their concessions expire at year-end.
Headed by Malaysian Chinese billionaire Tan Sri Lim, Genting has casinos globally including in Malaysia, Singapore, the United States and the United Kingdom. It does not currently operate in Macao.
READ MORE: Macao opens bids from seven casinos, Genting a wildcard
The stakes are high for Macao and the six gaming firms, which have operated in the special administrative region since 2002.
They have a strong chance to topple one of the incumbents…and Genting would have been encouraged to come in. With their background it makes a lot of sense
Ben Lee, Founder, IGamiX
If one of the incumbents lost their license it's likely to send tremors throughout Macao’s gambling industry as the companies have collectively invested more than $50 billion in the past two decades, are tied closely to the economic fortunes of Macao and employ tens of thousands of people.
It would cause "far too much disruption" if any of the six operators were replaced, said Terry Ng, an analyst at Daiwa in Hong Kong.
The Malaysian group's multiple non-gaming investments in China, including a prominent ski resort that was used for the Beijing 2022 Winter Olympics, are also likely to bolster its chances, analysts said.
"They have a strong chance to topple one of the incumbents…and Genting would have been encouraged to come in. With their background it makes a lot of sense," said Ben Lee, founder of Macao gaming consultancy IGamiX.
The group has been more successful at generating non-gaming revenue. In 2019 around 35 percent of total revenue at its Singapore property came from non-gaming versus 10-20 percent for Macao casinos.
COVID crunch
The COVID crisis exposed Macao's over-reliance on gaming, which analysts say underline the urgency to diversify as many of the incumbents are still struggling to recover.
Macao, the world's biggest gaming hub by revenue, raked in $36 billion in gambling revenues in 2019 – six times the Las Vegas Strip, before COVID decimated it by 70 percent to $10.8 billion in 2021.
If an incumbent loses their license, they must return the casino area to the government for free at the end of this year, making it financially unviable to operate the remaining facilities as gambling accounts for 80-90 percent of total revenue.
Genting, which has a 40 percent stake in developing a Macao hotel, could displace or enter into a joint venture with one of the financially weaker players such as SJM, some analysts said.
Genting’s properties are back to pre-COVID business, while it remains a hard grind for the incumbents.
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SJM, for instance, posted negative cash flow of HK$1.8 billion ($229.31 million) from operations in the first six months versus Genting Malaysia's positive cash flow of HK$1.5 billion.
While it’s unclear how quickly Macao can recover from stringent coronavirus rules – pent up demand is strong and the long-term outlook is not a worry, said Jennifer Song, an analyst at Morningstar.
A shortened license period of 10 years from 20 years is also not a problem, Song said, as the government would re-allocate facilities and resources to Genting if it won a license, so they “don’t actually need to build everything from the ground”.