China – Macau maintains its six license holders, but eliminates junkets and satellites.

The number of casino license holders will be preserved at six in the greatest revamp of Macau’s gaming legislation in 20 years, but the period of the licenses will be half to ten years.

The bill will now move to the legislature for approval before becoming law, after a 45-day public consultation period. The new legislation will also put an end to dedicated junket rooms and revenue-sharing arrangements between junkets and Macau’s casino concessionaires, according to Macau’s Secretary for Administration and Justice André Cheong Weng Chon. Contracts with satellite casinos will be terminated over the next three years, with SJM Resorts being the most affected, as it operates 14 of the 18 satellite casinos in Macau.

Mr. Chong said the changes were being made to ‘promote the healthy development of Macau’s gaming industry’ and to provide a ‘suitable scale of development .’

Jefferies Analysts said: “The proposed bill would remove the current sub-concession structure, but not change to the competitive dynamics ultimately. As the government crackdown on junkets continue, we expect long-term pressure on VIP business.”

Maintaining the current number of licenses is considered as a big win for existing license holders who have shown themselves over a two-decade period and appear to be difficult to outmuscle by new candidates.

JP Morgan said: “Some of investors’ biggest fears should now be alleviated. We were surprised the government’s stance on some contentious topics has become far less onerous, if not surprisingly accommodative, in this draft gaming law versus initial plans during the public consultation.”

In terms of the satellite casinos, it added: “This may create a lose-lose situation for SJM, which happens to be our least preferred name, as it would have to cease the contract and lose franchise fee (around 15 per cent of pre-COVID EBITDA) or buy-out satellite properties (which is probably a worse outcome, as they wouldn’t generate much if any returns).”

Ben Lee, of IGamiX Management and Consulting, added: “This new draft law provides some clarity in the short term, however it does not necessarily mean we will return to the heyday but it leads one to wonder if they are implying that the gaming revenue we have seen over the past two years is more or less what we will be permitted to have.”

There will also be a 30% limit on public floats for license holders.

This is to “enhance oversight for the healthy development of the gaming industry, not to impede market freedom,” according to Ku Mei Leng, Chief of Macau’s Office of the Secretary for Economy and Finance.

Steven Leung, analyst at Uob Kay Hian, said: “The measures seem to be reasonable as maintaining six licenses, with 10 years, still encourages them to invest with good return. I think the public float is a major concern from the government because gaming may involve capital outflows and money laundering. So a public float limit is needed.”

Existing and potential license holders will have to apply for a concession through a new tender process. The draft measure should be passed by Macau’s Legislative Assembly in about two months, allowing the next set of licenses to be awarded before the present ones expire on June 26, 2022.