Gaming sector could remain “un-investible” until clarity on concessions – JP Morgan

Brokerage JP Morgan warns investors that “until the clarity on the next concession emerges” the city’s gaming sector “could stay un-investable”. In a note sent by  JP Morgan Asia pacific analysts DS Kim, Amanda Cheng and Livy Lyu hint that such clarity is “unlikely in the next six months”, resulting that they advice investors to “stay cautious on the sector”.

Macau gaming shares tumbled after the government’s announcement of a consultation paper on the amendment of the gaming law, which was seen by analysts as intent to rein in the industry and increase oversight of gaming concessionaires and junket operations. 

The public consultation document proposed an increased oversight by authorities on gaming operations, dividend distribution, and the percentage held by Macau residents, with the government proposing for delegates to the concessionaires.

“We interpret the Government’s surprise announcement as an effective “SOE-rization” of the industry, which makes it difficult to establish a floor for both earnings profile”, the JP Morgan analysts argue, referring to the “state-owned enterprise” (SOE) model. 

The same note signals a bearish tone on the upcoming Golden week in light of the new travel restrictions imposed following the occurrence of new COVID-19 cases in the city. 

“The timing of these travel restrictions could hardly be worse, as the industry was preparing for solid pent-up demand for the upcoming Golden Week,” they wrote.