Read My Lips : No New Concessions (Or Casinos)
The Macau Government issued a statement today saying that there will be no new concessions and no new allocations of land for casino construction.
Read. My. Lips. No. New. Casinos.
Take it away Macau Chief Executive Edmund Ho:
At this stage we've held some assessments and discussions and followed the Central Government's (Beijing's) directives on the gaming industry and decided to take these policy measures.
One can only wonder what this means for some of the properties either in varying stages of design and planning such as Oceanus, Trinity, MegaBox, Hello Kitty and others. I'd guess that the land on Cotai has already been earmarked for casino construction, but the peninsula projects could be in jeopardy, particularly ones that involved demolition and reconstruction over existing buildings and shops. Expect statements from the concession holders shortly.
One thing is for sure, someone woke Caesars Entertainment (formerly Harrah's) CEO Gary Loveman up this morning with some really really really bad news. It's no secret that Caesarrah's has been itching to get into the Macau game, to the tune of buying the Macau Country Club. It looks like their investment into what they hoped to become Caesars Cotai just turned into... a golf course?
What this does create is heightened competition for existing land and concession agreements. Those who are currently holding casino zoned property may very well cancel their plans (if they're not too far down the pipeline) and squat until Johnny Checkbook comes knocking.
Additionally, the possibility of consolidation, purchase or outright takeover looms even larger for some of the six concession (and sub) holders. With Galaxy skirting at $5HK, carrying their debt load might be worth it compared to carrying a golf course. Same goes for Melco PBL, who would be even more attractive given that they're beating the crap out of the big boys right now.
Could be some interesting fluctuation in the gaming sector the short term. With wind of a possible Tracinda buy back of slumping MGM stock, the concession/casino bombshell and non-MPEL operators having to report that the Macau cushion to U.S. economic woes and decreased consumer spending has had the stuffing torn out of it by the competition, there could some fallout in the aftermath of the earnings reports. I wouldn't put it past Kerkorian to be fluffing the pillows a bit early as he masterfully did in advance of Dubai World's offer for City Center.
Strap on your seat belts.