Genting in Macau… Why? How? (Part 1 of 2) – IAG
Many IAG readers have requested an in-depth analysis of Genting’s chances of success in their bid for a casino concession in Macau and the implications for Macau of a Genting win. In this two-part article, to be published today and tomorrowIAG is conducting a thorough review of Genting’s offer.
At one minute to midnight — okay, actually 14 minutes before the 5 p.m. deadline on September 14, but that doesn’t seem quite so dramatic — an unexpected seventh bidder for a casino concession in Macau emerged, upsetting the applecart for the sextet oligopoly in place. The site of the drama was the office of Macau’s gaming regulator, the Gaming Inspection and Coordination Bureau, known by its Portuguese acronym, the DICJ. The six major incumbents had filed their offers at the DICJ office earlier in the day, with the exception of Wynn Macau who had filed the day before.
On the day of the deadline for submission – and the official opening of the tender documents two days later – the offices of the DICJ saw a veritable cavalcade of familiar faces, all taken by the press, representing a sample of Macao’s most famous personalities. the casino gaming industry. There was Galaxy Vice President Francis Lui (with no less than Macau Bar Association President Neto Valente accompanying him), the trio of Ho siblings – Lawrence, Pansy and Daisy representing Melco, MGM and SJM respectively, as well as SJM Resorts Managing Director Angela Leong and Corporate Secretary Rui Cunha, MGM General Counsel Antonio Menano, Melco Macao Operations Manager David Sisk, Wynn Macao Vice President Linda Chen, Sands General Counsel Dylan Williams and many more.
But among this who’s who of Macau’s top dealership executives, like a mysterious stranger kicking up dust on his way to town in a western, a most unknown sight – local Macau lawyer Bruno Nunes accompanied by a Mrs Chen and from someone who later turned out to be Fong Yee Wai, an employee of Yany Kwan Yan Chi. Kwan is, or at least was, a partner of Genting in building the Treasure Island property across from Casino Lisboa. The property had been touted as a potential future “Genting Macau”, although with the Genting Hong Kong holding entity gone and the equity transferred to Ao Mio Leong, that now seems less likely.
The Nunes, Chen and Fong trio were there to apply for a concession in Macau for a company named GMM Limited. The first thing that came out of the mouths of the assembled journalists was “Who? »
Common sense immediately suspected Genting – it was the “G” in “GMM” that revealed it – and within minutes AGI Field reporter searched Macao’s corporate registry and confirmed the suspicions. Presumably, the twin Ms of GMM represent Malaysia and Macao, in an as yet undetermined order.
While the Macau media quickly responded to the “Who?” question, no one has gone into the more meaningful questions of “Why?” and how?” So let’s do it!
First, “Why?” There is no need to repeat the countless columns that have been written about the near-apocalypse the Macau gambling industry has suffered since the pandemic hit nearly three years ago. Combined dealer debt is now estimated at US$24 billion – up from just US$5 billion in 2019 – and as a cohort, the Big Six are losing between US$500 million and US$1 billion per quarter .
It is understandable that existing dealers, with their infrastructure currently in place and their properties arguably almost worthless if they lose the right to distribute cards, are bidding to continue their casino business. This is the only way for them to recover the obscene losses they have accumulated during the pandemic. But why the hell would Genting want to get involved in such a… uh… storm? (Omitting the impolite first syllable, which also begins with “s”.)
It may be unfinished business. Remember Genting missed last time, 20 years ago. Additionally, Genting is still referred to as “the most global IR company in the world,” but with a mandatory qualifier, “but not from Macau.” The unfinished business and the mandatory qualifier may well irritate Genting Chairman Tan Sri KT Lim and he decided to do something about it.
But the real reason may have more to do with business aspirations than simply finishing up the unfinished or removing an unwanted tagline. After the past three years of pain, it’s becoming easy to forget that Macau was once the absolute darling of the IR world. It was Macau in first place and daylight in second. Macau’s GGR in 2013, which was US$45.1 billion for the year, is a simply stunning figure that no other single urban market in the world has ever come close to. Compare that to second-place Las Vegas (the Strip, Downtown and North Las Vegas combined), which had an all-time high GGR for the fiscal year through June 2022 of 9.3 billion. US dollars. And those are 2022 dollars, not 2013 dollars.
Most will say “but that was then, and this is now”, rightly pointing to the subsequent annihilation of Macau’s junket industry and mainland China’s now relentless and punctilious surveillance of outflows of capital. from the continent. But the market is still there. One thing remains as true today as it was in 2013: there are more than 100 million people in China’s richest province, Guangdong, many of whom to like to play. And most of them are only a few minutes by train, bus or car from Macau – the only place in all of China where casino gambling is legal. If China’s central government ever backs down from its current policies that have (intentionally or unintentionally) hampered Macau, this huge addressable market has the potential to come back.
Genting is a company with a history of 57 years. They have had their ups and downs over the decades. The “highs” included Resorts World Genting’s cash cow monopoly on a mountain an hour’s drive north of Kuala Lumpur and their upset win in Singapore giving them access to the city-state’s lucrative duopoly market. Among the “lows” was the recent pandemic-induced collapse of Genting Hong Kong, which imploded with some $2.8 billion in debt, resulting in the loss of Genting’s stake in Resorts World Manila and its business. cruise line in Hong Kong, although this latest loss could be somewhat improved by the phoenix-like launch of Resorts World Cruises in Singapore.
Through it all, Genting has proven its ability to survive the march of time, and it is this long-term thinking that may be the inspiration behind Genting’s Macau bid.
After considering the “Why?” of Genting’s offer, let’s move on to the “How?” How could Genting actually win their bid, snatching a concession from one of the titular sextets? And if they did, how would that be accretive to Macau as a whole? How would Genting, the losing concession and the Macau government deal with the minefield of reversion? How would Genting, in a very cash-strapped environment, fund a multi-billion dollar casino gaming business in Macau, and its subsequent business losses? Don’t worry, they would have losing money from day one. So many questions that we will examine tomorrow.
The second and last part of this article will be publishedtomorrow before 8:00 a.m. Macau time.