Casino giants to inject $20b into non-gaming

Macau's six major casino operators are required to inject an additional HK$20 billion into non-gaming businesses in the next nine years as gross gaming revenue reaches the predetermined threshold.

Operators will need to upscale their non-gaming investment by 20 percent if gaming revenue reaches 180 billion patacas (HK$174.8 billion) in any year until 2027, as part of the terms for their license renewals.

Last year, the SAR's gaming income hit 183.1 billion patacas- way better than the 130 billion patacas the government had estimated - but was still at just 62.6 percent of prepandemic levels.

License holders have committed to invest a total of 118.8 billion patacas, including 108.7 billion patacas in non-gaming operations, over the next 10 years when they signed the shortened contracts with the government to extend their concessions by 10 years in late 2022. That non-gaming commitment would now grow to 130.4 billion patacas after the terms were triggered.

But the impact on their profitability might be insignificant.

Given the fact that the investments will be made over 10 years, an extra cash outflow of 2.2 billion patacas per year - or from 200 million patacas to 556 million patacas per concessionaire- will not be too much of a burden to the casino runners, analysts said.

And the negative effects might be offset if engaging in non-gaming businesses can attract more visitors to gaming firms' resorts and in turn boost the mass market gaming revenue, the analysts added.

Goldman Sachs said it remains relatively positive on the prospects of the industry, with risks mainly to arise from the increases in costs and capital expenditure.