Macau on line casino shares soar after new draft legislation on licenses is much less onerous than feared

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Macau casino shares rose on Monday as investors welcomed a new bill for the industry that was softer than initially feared.

Sands China Ltd. 1928, +14.08% up 15%, Wynn Macau Ltd. 1128, +10.08%, up 11% and Galaxy Entertainment Group Ltd. 27, +7.13% up 6.9% in morning trade. Their smaller competitors Melco International Development Ltd. 200, +5.51%,
MGM China Holdings Ltd. 2282, +11.49% and SJM Holdings Ltd. 880, +4.25% added 5.8%-11%.

The gains also followed a strong performance on Friday in US-listed casino operator stocks that have operations in Macau. Las Vegas Sands Corp. LVS, +14.15%, up 14% and Wynn Resorts Ltd. WYNN, +8.60%, up 8.6%. Both companies’ shares have fallen sharply over the past year.

The new bill, unveiled by Macau’s cabinet on Friday, would grant a maximum of six casino licenses, easing fears that some casinos’ license renewals could be at risk. It also scrapped a previous requirement for government officials to be deployed to casinos to oversee their operations more closely.

The bill, which will come to lawmakers for deliberation, cuts the term for new casino licenses in half and says operations must be consistent with China’s national security needs.

Analysts said the moves collectively allayed fears of a worst-case scenario for casino operators at the gaming hub.

“We were surprised that the government’s stance on some contentious issues has become far less onerous, if not surprisingly accommodating,” JPMorgan said in a note. It referred to unchanged taxation and no plans to restrict dividend payments.

JPMorgan has an overweight rating on Sands China, Galaxy Entertainment, Wynn Macau, and MGM China, with the first two being the top picks.

US bank Jefferies said in a statement it expects licenses for all six concessionaires in Macau to be renewed. The next phase of the industry’s recovery will depend on the government’s policy of easing travel restrictions amid sporadic Covid-19 outbreaks, it said.

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