Morgan Stanley Predict 24% Increase in Market Value for Macau by 2020

According to reports by Morgan Stanley analysts, the total market value of six operators in Macau is set to reach a whopping total of $146 billion by the year 2020. That is an overall increase of 24 percent in market value. The revenue is driven by a compound annual growth rate or CAGR of 13 percent.

 

Currently, the total value of the six operators in Macau stands at $118 billion.

 

Possible disruptions to the predicted growth of Macau’s operators

 

Despite what the reports say, there are some significant obstacles to the growth of Macau’s operators. One of the disruptions is competition from Japanese and Hainanese operators, and the other is the impending license rebidding process for Macau operators, SGM, and MGM. The other four operators- Melco, Wynn, Galaxy, and Sands, will need to renew their licenses in four years. SGM and MGM are due to renew their licenses by the year 2020. Some people believe that perhaps both SGM and MGM could be eligible to receive a 2-year extension on their current licenses so that all sic operators would be due to get their licenses renewed at the same time.

 

These disruptions could result in a setback as massive as 41 percent.

 

License renewal can have either of the two significant impacts on Macau’s gambling industry- it can have a completely negative effect on the financial resources of Macau’s operators or it could result in a huge loss of profits for the gaming industry.

 

The operators have already tried to be proactive and applied for their licenses to be renewed. The procedures are now being looked over by the Macau legislators. However, according to many people, there is no license renewal process in Macau, and the only way for these operators to get their licenses renewed is to rebid them as per the current guidelines.

 

In addition to this, as said earlier, competition from the growing gaming industry in the Association of South East Nations or the ASEAN could mean a significant loss in revenue for Macau operators as China faces competitions from these regions.

 

Can gaming stocks withstand these disruptions?

 

Analysts at Morgan Stanley also observed that the US gaming stocks are likely to weather these disruptions much better because of the way they are placed.

 

When it comes to Macau, Galaxy and Sands China, two major operators with a high-profit margin, both of them are likely to be able to withstand the negative impact of these disruptions.