Macau Business | March 2022
Alike the operations of junkets, authorities are set to tighten control over satellite casinos under the new gaming bill. Still, little details have so far been provided on how the landscape of this operational mode will exactly be shaped and the potential impact
As the deliberation of the long-awaited draft bill of amendments to the Macau gaming law is now underway in a subcommittee of the Legislative Assembly, great emphasis has so far been placed on the future of satellite casinos over proposed changes in the relationship between these third-party casino service providers and gaming operators.
The draft bill, unveiled in January, proposes any casino operating in the city must be established in the assets “owned” by gaming concessionaires. A grace period of three years will be given to gaming concessionaires following the implementation of the revised law to tackle the situation if they have established casinos in the assets owned by other parties. The bill adds the authorities would also recognise the legal status of “management companies” that oversee all or part of a casino of a gaming concessionaire.
These provisions are game-changers to the current business model of satellite casinos, or also known as third-party promoted casinos, referring to gaming venues that are managed by independent investors under the licences of gaming concessionaires through a service agreement. Currently there are 18 operational satellite casinos among a total of 40 casinos in the territory, and 14 of these third-party promoted casinos are run under the licence of gaming operator SJM Holdings Ltd while the other four are linked to Galaxy Entertainment Group (GEG) and Melco Resorts and Entertainment Ltd.
This proposed change, which was not mentioned in the public consultation on the matter last year, has raised a number of questions across the sector and the community, namely, how is the ownership of the assets by concessionaires defined — whether it requires full ownership, majority ownership or just similar a stake from concessionaires in the properties. Most of the 18 operational satellite casinos here are not located in the assets owned by gaming concessionaires, and one of the mere exceptions is the Casino Ponte 16, which is situated in the eponymous tourism and gaming complex in the Inner Harbour Area, where an SJM-linked affiliate has a 51-per cent stake.
More details needed
More importantly, the proposed revision also prompts uncertainties whether gaming operators will acquire these assets and with what price in the current economic fundamentals. Asked about the issue in a press conference in February, Francis Lui Yiu Tung, deputy chairman of GEG, remarked “it’s too early to say” whether the operator would purchase all the three third-party promoted casinos that are under the licence of GEG and located at the Rio Hotel, the Waldo Hotel and the President Hotel respectively in the NAPE area of the Macau peninsula.
Awaiting for more details from the authorities on how this new requirement will work, he added the three-year grace period gave them “sufficient time” to discuss the issue with the owners of satellite casinos.
Satellite casino owners and investors also request more details from the government, stressing gaming concessionaires don’t have the financial resources to purchase all the assets of satellite casinos at a reasonable price. The failure to reach consensus between both parties will lead to the closure of some of these gaming venues, they say.
“We understand the government hopes to strengthen supervision for the healthy development of the [gaming] industry but it also has to take into the considerations of the market needs,” says Chong Siu Kin, chairperson of New Orient Group, which runs the satellite gaming venue, Casino Landmark, at the New Orient Landmark Hotel in the NAPE area.
Commenting briefly on the matter, he underscores the economic significance of third-party promoted casinos to the community. “The satellite casinos support the businesses of restaurants, eateries, retail shops and others in the NAPE area [where a majority of these gaming venues are clustered],” the businessman illustrates “If they are closed it will impact the business environment of the district.”
Accounting for nearly half of the casinos in the territory, the 18 operating third-party gaming venues now boast about 930 gaming tables, or about 15 per cent of 6,198 tables across the market, according to the estimates by local industry representatives and media reports. The gaming revenue generated by satellite casinos now represent about 8-10 per cent of the total gaming revenue, compared to more than 15 per cent in the past, they say.
Melinda Chan Mei Yi, executive director of Macau Legend Development Limited and CEO of the Macau Fisherman’s Wharf, has also stressed in a recent public occasion about the contribution of satellite casinos to the community. Macau Legend Development now manages two satellite gaming venues — Casino Babylon and Casino Legend Palace — at the Macau Fisherman’s Wharf.
Underlining satellite casinos have always been strictly complying with local rules and regulations, she remarked they have been part of the history of the city that “should be respected”.
The concept of satellite casinos first emerged in the 1990’s during the era of gaming monopoly held by Sociedade de Turismo e Diversões de Macau (STDM), local studies show. It was an effective business model for STDM — founded by the late tycoon Stanley Ho Hung Sun — at the time, because the conglomerate did not have to invest in the development and management of these casinos while it shared the revenue generated by these venues, the studies say.
According to an article penned by Chan Chi Leong, a local gaming data analyst, in 2013, satellite casinos owners have to be responsible for all the operating costs of the venues, including payrolls to staff, while gaming operators are required to settle all the gaming-related levies that amount to 39 per cent of the gaming revenue. The study, titled “Presence and Future of Satellite Casinos in Macau”, illustrated in general satellite casino owners or investors could pocket about 55-57 per cent of the gaming revenue generated by these venues while gaming operators could share 43-45 per cent.
Nonetheless, this revenue-sharing model will soon be over should satellite casinos continue to exist. The draft gaming bill recognises the status of “management companies” of a gaming venue besides gaming concessionaires, but these “management companies”, which refer to satellite casinos, could only receive “management fees” from gaming concessionaires, and any forms of commission or profit sharing will be forbidden.
Davis Fong Ka Chio, director of the Institute for the Study of Commercial Gaming of the University of Macau, supports the latest move from the authorities as the issue of satellite casinos was not addressed by the existing legal framework. The academic is also not particularly concerned that gaming concessionaires would not be interested in purchasing these assets. “The authorities have pledged no more new land plots will be zoned for gaming purposes in the future… so there is a limited amount of land resources for operating casinos,” he says. “And some satellite casinos are situated in prime locations.”
Concerning satellite casino owners could only receive “management fees” from gaming concessionaires in the future, the scholar says the proposed bill did not set a cap on the “management fees” and both sides could negotiate for the appropriate amount of the fees.
The government has so far explained this move is not to “replace or outlaw” satellite gaming venues. During the discussion of the revised gaming law at the first reading in the Legislative Assembly in late January, Secretary for Economy and Finance Lei Wai Nong emphasised both the existing and proposed new versions of the gaming law mandate gaming concessionaires have to revert the physical gaming venues and casino equipment back to the authorities at the lapse of their concessions. The proposal change requiring casinos to be set up in the assets owned by concessionaires is to ensure this could happen, he added.
The subcommittee of the legislature is now discussing the bill before an expected final reading by June or earlier, and changes are still possible to be made in the meantime. Legislator Leong Sun Iok points out some of the additional technical challenges concerning the satellite casino issue, saying these venues — usually located within hotels — must first have strata title registrations. Some of them are now registered with the authorities as one asset together with other non-gaming facilities of the building rather than possessing separate individual titles, he says. “If they don’t have strata titles ready, they could only be up for sale as an entire project together with other non-gaming facilities,” he reasons, which will impose more hurdles for the negotiations between the owners of these venues and gaming concessionaires.
Tying with concessionaires
Supporting the authorities to increase oversight on satellite casinos, the lawmaker from the Macau Federation of Trade Unions, the city’s largest labour group, adds officials should handle the matter cautiously, though. “These companies employ over 10,000 workers altogether, and if any of them wind down this will severely impact local employment,” he remarks. “The government should pay attention to the concerns from the industry and community… for instance, whether a grace period of three years is sufficient.”
Si Ka Lon, one of the legislators from the camp of local Fujian community — in which Chan Meng Kam, who runs four satellite casinos across the city, is one of the leaders — has suggested the new provisions only apply to new third-party promoted gaming venues while the current casinos follow the existing regime.
In the perspective of Prof Fong, some satellite casino investors could also forge closer ties with the existing gaming operators, as the draft bill proposes the managing director of gaming concessionaires has to be a Macau permanent resident with at least 15 per cent of the share capital in the firm. “It is possible to see some satellite casino owners collaborate with others for a bid in the new round of public tender,” he says.
Satellite Casinos: Where and Who?
Macau Business looks into the information from resources such as company registration records, land records, company announcements, stock filings, media reports and others to unveil who or which companies are now behind the territory’s 18 operational satellite casinos.
Golden Dragon Group (Chan Meng Kam)
Chan Meng Kam, the local political heavyweight and businessman, is at the helm of Macau-based conglomerate Golden Dragon Group, which is the biggest satellite casino investor here in terms of the number of such venues. The company manages three casinos in the NAPE area under the licence of SJM Holdings Ltd, while it also runs Casino Grand Dragon in Taipa under Melco Resorts and Entertainment Ltd’s licence.
A former legislator between 2005 and 2017, and a former member of the Executive Council between 2009 and 2019, Mr Chan, who now serves as a Macau deputy to the Chinese People’s Political Consultative Conference (CPPCC), is an influential figure in the local Fujian community, which represents three out of 14 directly-elected seats in the Legislative Assembly.
Macau Legend Development Ltd
The company, founded by local veteran gaming entrepreneur David Chow Kam Fai, operates the Macau Fisherman’s Wharf next to the Outer Harbour Ferry Terminal, which is home to two satellite gaming venues. Besides the proposed amendments to the gaming law, the firm has been in the midst of the storm in recent times, as its largest individual shareholder Levo Chan Weng Lin was arrested in January by the local police over alleged illicit gambling practices, money laundering and involvement in a criminal syndicate. Mr Chan, who is also the boss of junket operator Tak Chun Group, has resigned from the positions of co-chairman, CEO and executive director of Macau Legend following his detention. The founder, Mr Chow, still serves as the non-executive director and co-chairman of the firm, while his wife Melinda Chan Mei Yi, a former legislator, serves as an executive director of the firm and CEO of the Macau Fisherman’s Wharf.
Kingston Financial Group (Pollyanna Chu)
Apart from engaging in securities brokerage, underwriting and placements, margin and initial public offering (IPO) financing, and other financial services in the nearby SAR, the Hong Kong-listed firm also runs two third party-promoted gaming revenues in the NAPE area and Taipa. Pollyanna Chu Yuet Wah is the CEO of the firm, who is known as the “Queen of Shell Companies” in the Asian financial centre, and ranks at the 48th place in the latest list of Hong Kong’s 50 Richest by Forbes.
New Orient (Chong Siu Kin)
Casino Landmark; New Orient Landmark Hotel; SJM licence
This third party-promoted gaming venue located in Landmark Hotel in the ZAPE was originally owned by Macau Legend, who sold the casino-hotel to an entity called New Macau Landmark Management Ltd in 2017 at HK$4.6 billion (US$589.1 million). Following the sale, the hotel has been rebranded as New Orient Landmark Hotel.
The current majority owner of the casino-hotel is local real estate tycoon Chong Siu Kin, chairperson of New Orient Group, who is also involved in the development of high-end residential project Waterfront Duet residences near the Macau Yacht Club in Fai Chi Kei. He has been involved in casino junket business for years before this deal.
Casino Le Royal Arc; L’Arc Macau; SJM licence
Besides serving as the co-chairman and executive director of gaming operator SJM, as well as an indirectly-elected legislator, Angela Leong also fully owns the casino-hotel L’Arc Macau, which opened in the NAPE area in 2009. According to local media reports, Hong Kong real estate tycoon Cheng Yu Tung had once been an investor in the property, but Ms. Leong, who is the fourth consort of the late SJM founder Stanley Ho Hung Sun, has acquired all the stakes in the casino-hotel since last year.
Success Universe Group Ltd (Sonny Yeung)
Casino Ponte 16; Ponte 16, Inner Harbour Area; SJM licence
The casino is located in the tourism and gaming complex Ponte 16 Resort Macau in the Inner Harbour area, which opened in 2008. The resort is co-developed by an SJM-linked affiliate and Success Universe Group headed by Hong Kong businessman Sonny Yeung Hoi Sing, with the former holding a 51-per cent stake in the project while Success Universe having 49-per cent interests.
Emperor Group (Albert Yeung)
Casino Emperor Palace; Grand Emperor Hotel; SJM licence
The 311-room casino-hotel in the downtown of the Macau peninsula was inaugurated by Emperor Entertainment Hotel Limited in 2006, a gaming arm of the Hong Kong-based conglomerate Emperor Group, whose business empire stretches from jewelleries to property to media and entertainment in the Greater China region. The group, which also runs Inn Hotel without gaming facilities in Taipa, is headed by Albert Yeung Sau Shing, an elder brother of Success Universe’s Sonny Yeung.
Casino Kam Pek Paradise; Rua de Foshan, Edf. Centro Comercial San Kin Yip; SJM licence
Situated in the downtown of the Macau peninsula next to the SJM flagship properties Lisboa Hotel and Grand Lisboa Hotel, the 200,000-square-feet Casino Kam Pek Paradise has been managed by LT (Macau) Ltd, a subsidiary of Hong Kong-listed Paradise Entertainment Ltd, since late 2007. The casino games maker had also provided casino management service to the casino-hotel Waldo in the NAPE area under the licence of Galaxy Entertainment Group (GEG) before, but its partnership with the owner of the property concluded in 2020.
Casino Macau Jockey Club; Hotel Roosevelt Macau, Taipa; SJM licence
The casino has been relocated from inside the Macau Jockey Club to Hotel Roosevelt Macau, which is just next to the club in Cotai, since the inauguration of the latter in 2017. The hotel property is developed by an entity called YOHO Group, which is also behind luxury housing projects YOHO: Cotai Star Prestige, YOHO: Cotai Marina Bay, Oscar Crescent and YOHO Twins in Cotai and Taipa. The firm is linked to veteran property investor Ao Mio Leong. Genting Hong Kong, the cruise ship arm of Malaysian gaming operator Genting Group, sold 50 per cent of its interests in Genting Macau to Ms. Ao in 2020. Genting Macau has a 75-per cent stake in the waterfront hotel project that is now being built near Praca de Ferreira do Amaral in the downtown of the peninsula.
Sio Tak Hong
Casino Fortuna; Fortuna Hotel; SJM licence
The 19-storey casino-hotel was inaugurated in the 1990’s in the NAPE area by investors headed by prominent local businessman Sio Tak Hong, who has run various property and commercial projects in the city. Mr Sio has also founded the Macau Jiangmen Communal Society, one of the most influential clan associations in the city alongside the Fujian community groups.
In December 2021, Mr Sio was placed under pre-trial detention over an investigation into alleged corruption and money laundering involving former Land and Public Works Bureau director Li Canfeng.
Loi Keong Kuong
Casino Rio; Rio Hotel; Galaxy licence
The gaming venue is found in the nearly-450-room Hotel Rio in the NAPE area, which was founded by Rio Hotel Limited in 2006. Local property tycoon Loi Keong Kuong is the largest single shareholder of the firm, who has also been involved in the development of the luxury housing complex One Grantai on the mountain Taipa Grande. Company records also show Sio Tak Hong had been involved in the board of shareholders and administration of the company In the early stage but he had left the firm before the opening of the property.
Lee Fok Holdings (Ng Fok)
Casino President; President Hotel; Galaxy licence
The casino is located in the 21-storey President Hotel opposite to GEG’s property StarWorld Hotel in the downtown of the Macau peninsula. The hotel, which opened in the 1980’s, originally did not feature gaming facilities but has only comprised gaming offerings since 2006 following renovation under the GEG licence. The casino-hotel was developed by Lee Fok (Holdings) Ltd, which is headed by local business tycoon Ng Fok, who also runs another hotel project in the city, Golden Crown China Hotel in the vicinity of the Macau International Airport in Taipa.
Li Chi Keung
Casino Waldo; Waldo Hotel; Galaxy licence
The casino-hotel of close to 160 guestrooms was inaugurated in the NAPE area in 2004, becoming the first operating gaming venue under the GEG licence in the city. The project was developed by Waldo Hotel Limited, which is majorly and indirectly owned by several BVI entities. But Li Chi Keung, a heavyweight in the local junket segment, has been appointed as an administrator of Waldo Hotel Limited since 2021, and he has been tasked to handle the documents about the casino operation between the firm and GEG, company records show. Mr Li is best known for his involvement in junket operator Golden Group, Macau Jockey Club, and Macau SLOT Co Ltd, as well as his close ties to the late tycoon Stanley Ho. He also has a stake in another satellite casino firm, Macau Legend.
Meanwhile, the daily operation of Waldo Hotel has been at the helm of Choi Wai Chan since last year, company records say. But Mr Choi, chairman and CEO of travel firm Ying Hai Group Holdings, was arrested alongside Levo Chan, boss of junket operator Tak Chun, in January over alleged illicit gambling activities and other accusations.