Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

Casino Business Review LLC

Extensive experience in marketing and development in the Asian gaming market

Global Gaming and Casinos Industry

Thematic (Sector/Industry)

<ul>
<li>Negative outlooks on the sector driven by China zero Covid policy, but quarantine free corridors from Hong Kong and Macau can help carry recovery cycle until spring openings.</li>
<li>The gaming sector has taken a major beating since 2020 obviously due to the pandemic,but also pending regulatory revisions expected by June.</li>
<li>Valuations of key stocks in the sector remain low relative to asset values and post pandemic recovery cycle revenue and earnings gains against 2020 and 2021 comps.</li>
</ul>


Negative outlooks on the sector driven by China zero Covid policy, but quarantine free corridors from Hong Kong and Macau can help carry recovery cycle until spring openings.
The gaming sector has taken a major beating since 2020 obviously due to the pandemic,but also pending regulatory revisions expected by June.
Valuations of key stocks in the sector remain low relative to asset values and post pandemic recovery cycle revenue and earnings gains against 2020 and 2021 comps.


Macau Gaming: 2022 Recovery in Sight by Spring but Uncertainties Linger--Values Now Attractive

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyzed the latest HK SFC report for aggregate short position as of Nov 26. </li>
<li>The aggregate short value for equities decreased by $868m (-1.2%) WoW but increased by $8,376m (+13.8%) over the preceding four weeks.</li>
<li>We highlight short increases in JD (9618.HK), Xiami (1810.HK) and Galaxy Entertainment (0027.HK)</li>
</ul>


We analyzed the latest HK SFC report for aggregate short position as of Nov 26. 
The aggregate short value for equities decreased by $868m (-1.2%) WoW but increased by $8,376m (+13.8%) over the preceding four weeks.
We highlight short increases in JD (9618.HK), Xiami (1810.HK) and Galaxy Entertainment (0027.HK)


IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/blackstone-group-inc" target="_blank" data-smartkarma-citation="entities:27166:1" rel="noopener">Blackstone Group (BX US)</a> has returned for a third time with a A$12.50 cash per share offer, a marginal 1.2% bump to its last offer of A$12.35 on 10 May.</li>
<li>
<a href="https://www.smartkarma.com/entities/crown-resorts-ltd" target="_blank" data-smartkarma-citation="entities:808:1" rel="noopener">Crown Resorts (CWN AU)</a> is at the start of a difficult reform agenda it needs to fulfil to maintain its gaming licenses. Nevertheless, Blackstone’s ongoing interest suggest inherent value.</li>
<li>Blackstone’s bid retains leeway for a bump and may draw out previous suitors. At the last close of A$11.54, the shares trade at an 8.3% gross spread to the offer.</li>
</ul>



Blackstone Group (BX US) has returned for a third time with a A$12.50 cash per share offer, a marginal 1.2% bump to its last offer of A$12.35 on 10 May.

Crown Resorts (CWN AU) is at the start of a difficult reform agenda it needs to fulfil to maintain its gaming licenses. Nevertheless, Blackstone’s ongoing interest suggest inherent value.
Blackstone’s bid retains leeway for a bump and may draw out previous suitors. At the last close of A$11.54, the shares trade at an 8.3% gross spread to the offer.


Blackstone Third-Time Lucky with Crown Resorts Bid?

Forensic Analyst

Jason Yap, CFA

Forensic Accounting

Macau's top gaming stocks <a href="https://www.straitstimes.com/business/companies-markets/macau-casinos-see-188-billion-wipeout-as-china-tightens-control" target="_blank" rel="noopener">lost</a> a record USD18 billion in combined market value on 15 September 2021 after the Macau administration <a href="https://www.ggrasia.com/public-consultation-re-gaming-law-review-from-sept-15/" target="_blank" rel="noopener">announced</a><a href="https://www.ggrasia.com/macau-may-end-casino-sub-concessions-directly-monitor-ops/" target="_blank" rel="noopener"></a> a 45 day public consultation period to discuss revisions to Gaming Laws, which comes as the June 2022 expiration deadline for existing gaming concessions loomed. Amongst others, the abolishment of the sub-concession framework (which could reduce current 6 operators to 3 operators), restriction on distribution of dividend, and Macau government's direct supervision of casino operations drew the most consternation from investors and analysts. The sweeping revisions compound the woes of Macau's casino operators, such as <a href="https://www.smartkarma.com/entities/wynn-macau-ltd" target="_blank" data-smartkarma-citation="entities:473:1" rel="noopener">Wynn Macau Ltd (1128 HK) </a> and <a href="https://www.smartkarma.com/entities/sands-china-ltd-088dbd12-a0e9-4516-a68f-6a3cf8aa065d" target="_blank" data-smartkarma-citation="entities:28515:1" rel="noopener">Sands China Ltd (SCHYY US)</a>, which had already been badly affected by pandemic driven travel restrictions, and which obliterated their gaming revenues.While there were some improvements due to easing of travel restrictions for Mainland travelers in September 2020, gross gaming revenues (GGR) remain a shadow of its past.  The daily average of visitors to Macau during October's Golden Week was <a href="https://www.ggrasia.com/macau-oct-golden-week-daily-average-visits-dip-93pct-y-o-y/" target="_blank" rel="noopener">down 93.7%</a> on daily average in 2020. The decline coincided with new COVID-19 cases confirmed in Macau around the same period. Amongst its peers, <a href="https://www.smartkarma.com/entities/wynn-macau-ltd" target="_blank" data-smartkarma-citation="entities:473:1" rel="noopener">Wynn Macau Ltd (1128 HK)</a>  is the most highly levered and had already dodged a bullet by securing covenant waivers in April 2020 at the peak of the pandemic.In this Insight, we discuss the impact of the proposed revisions and subdued GGR recovery on <a href="https://www.smartkarma.com/entities/wynn-macau-ltd" target="_blank" data-smartkarma-citation="entities:473:1" rel="noopener">Wynn Macau Ltd (1128 HK)</a>'s cash reserves, debt servicing ability, and whether there may be potential breaches of its financial covenants.

Macau's top gaming stocks lost a record USD18 billion in combined market value on 15 September 2021 after the Macau administration announced a 45 day public consultation period to discuss revisions to Gaming Laws, which comes as the June 2022 expiration deadline for existing gaming concessions loomed. Amongst others, the abolishment of the sub-concession framework (which could reduce current 6 operators to 3 operators), restriction on distribution of dividend, and Macau government's direct supervision of casino operations drew the most consternation from investors and analysts. The sweeping revisions compound the woes of Macau's casino operators, such as Wynn Macau Ltd (1128 HK)  and Sands China Ltd (SCHYY US), which had already been badly affected by pandemic driven travel restrictions, and which obliterated their gaming revenues.While there were some improvements due to easing of travel restrictions for Mainland travelers in September 2020, gross gaming revenues (GGR) remain a shadow of its past.  The daily average of visitors to Macau during October's Golden Week was down 93.7% on daily average in 2020. The decline coincided with new COVID-19 cases confirmed in Macau around the same period. Amongst its peers, Wynn Macau Ltd (1128 HK)  is the most highly levered and had already dodged a bullet by securing covenant waivers in April 2020 at the peak of the pandemic.In this Insight, we discuss the impact of the proposed revisions and subdued GGR recovery on Wynn Macau Ltd (1128 HK)'s cash reserves, debt servicing ability, and whether there may be potential breaches of its financial covenants.

Wynn Macau (1128 HK) - Gaming Law Revisions and Impact on Financial Covenants

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

Lotte Tour Development Co, Ltd. / Equity Bottom-Up

The sharp government crackdown on the Macau casinos is a boon on the Korean casinos. Because the government crackdown on the Macau casinos could last longer (next 6-12 months, for example), we believe that this is likely to lead to benefit the major casino operators of other major Asian countries such as in Korea, including companies such as Paradise and Lotte Tour Development. At this point, the great unknown regarding the Macau casino industry is how aggressively the Chinese government will try to impose on how the major casinos in Macau operate. We highlighted four major factors that the CCP could aggressively intrude on them including dividends, BOD representation, ownership, and expansion of non-casino businesses. Although there have been some increased regulatory scrutiny by the CCP on the Macau casinos in the past, this new crackdown in the past two weeks is probably one of the most restrictive and problematic ever. What is different this time around is timing. Unlike the previous crackdowns, this crackdown has involved not just the gambling sector but also other major sectors including education, technology, and entertainment.<ul>
<li>At its core, it deals with the fundamental issue of capitalism vs. communism, the details of which is beyond this article.</li>
<li>For the investor that actively trade the Asian casinos, it is very difficult to "buy the dip" since if indeed the CCP becomes major shareholders of these Macau casinos (including BOD representation), these companies would not be acting in the best interests of their shareholders and would not be maximizing their capital efficiency.</li>
<li>Rather, they would take directives from the CCP and minority shareholders would be screwed. </li>
</ul>

The sharp government crackdown on the Macau casinos is a boon on the Korean casinos. Because the government crackdown on the Macau casinos could last longer (next 6-12 months, for example), we believe that this is likely to lead to benefit the major casino operators of other major Asian countries such as in Korea, including companies such as Paradise and Lotte Tour Development. At this point, the great unknown regarding the Macau casino industry is how aggressively the Chinese government will try to impose on how the major casinos in Macau operate. We highlighted four major factors that the CCP could aggressively intrude on them including dividends, BOD representation, ownership, and expansion of non-casino businesses. Although there have been some increased regulatory scrutiny by the CCP on the Macau casinos in the past, this new crackdown in the past two weeks is probably one of the most restrictive and problematic ever. What is different this time around is timing. Unlike the previous crackdowns, this crackdown has involved not just the gambling sector but also other major sectors including education, technology, and entertainment.
At its core, it deals with the fundamental issue of capitalism vs. communism, the details of which is beyond this article.
For the investor that actively trade the Asian casinos, it is very difficult to "buy the dip" since if indeed the CCP becomes major shareholders of these Macau casinos (including BOD representation), these companies would not be acting in the best interests of their shareholders and would not be maximizing their capital efficiency.
Rather, they would take directives from the CCP and minority shareholders would be screwed. 


A Crackdown on the Macau Casinos Is a Boon on the Korean Casinos

Hong Kong

Galaxy Entertainment Group Limited, through its subsidiary, operates casino, hotel and other entertainment facilities in Macau. The company also manufactures sells and distributes construction materials.

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Galaxy Entertainment Group (27 HK)

Macau Gaming: 2022 Recovery in Sight by Spring but Uncertainties Linger--Values Now Attractive

Headwinds buffeting the Macau gaming market continue keeping valuations low but in the intermediate terms there are signs that the recovery cycle...

Howard J Klein

HK Short Interest: JD, Xiaomi, Galaxy

We highlight week on week short increases on JD.com (9618 HK), Xiaomi (1810 HK) and Galaxy Entertainment (27 HK) in the latest HK SFC short...

Ke Yan, CFA, FRM

Blackstone Third-Time Lucky with Crown Resorts Bid?

Blackstone’s new A$12.50 cash per share bid retains leeway for a bump and may draw out previous suitors. At the last close of A$11.54 per share,...

Arun George

Wynn Macau (1128 HK) - Gaming Law Revisions and Impact on Financial Covenants

Macau's gaming stocks lost USD18 billion in market value after the Macau administration announced proposed revisions to Gaming Laws. We discuss the...

Jason Yap, CFA

A Crackdown on the Macau Casinos Is a Boon on the Korean Casinos

The sharp government crackdown on the Macau casinos is a boon on the Korean casinos. Because the government crackdown on the Macau casinos could...

Douglas Kim

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