A “wide range of outcomes is possible” regarding the future of Macau’s satellite casinos, says a report from brokerage CLSA Ltd. The institution added that “maintaining commercial viability and low unemployment” would in likelihood be “two key considerations” when deciding the fate of these gaming venues.
Macau currently has 11 satellite casinos that continue to operate under the 10-year gaming concessions that started in January 2023. Nine of those 11 satellite casinos are under SJM Holdings Ltd’s licence; one is under Galaxy Entertainment Group Ltd’s permit; and one is under Melco Resorts & Entertainment Ltd’s gaming rights.
Under the city’s revamped gaming regulatory framework – coinciding with the current concessions of the six Macau operators – from 2026, the third-party investors in satellite casinos will only be permitted to earn a “management fee” via a “management company”.
They will not be allowed to take part in other traditional business practices for the satellite sector, such as having a share of gaming revenue. A three-year grace period from 2023 until the end of this year, currently permits the latter system to persist.
According to the Thursday report from CLSA analyst Jeffrey Kiang, “there are no provisions” in the new gaming law stating that a management fee “must be fixed in amount”.
As such, he added, a “possible form” for satellite casinos to continue operating in Macau would be “a management fee plus step-up or inflation-linked terms (i.e., not a fixed amount); aligning with ‘management fee plus rental income’ model, recently suggested by industry experts”.
“For the profitable ones, including Casino Kam Pek Paradise – managed by Paradise Entertainment –, we do not see compelling reasons for them to cease operations,” stated the analyst in Thursday’s memo.
Casino Kam Pek Paradise, in downtown Macau, is under the licence of SJM Holdings, and is run via a services agreement by Hong Kong-listed Paradise Entertainment Ltd.
He added: “Loss-making satellite casinos will likely cease operations.”
The analyst further noted: ” While the same concessionaires will likely take over all employees, the takeovers should still be earnings-accretive to concessionaires if they are awarded the same tables by the government.”
Table yields
Mr Kiang suggested moving such tables to casinos with higher table yields “would be economically sensible,” and should “comfortably cover incremental staff costs” as satellite workers are expected to be absorbed into the core business.
Aside from the possibility of Casino Kam Pek Paradise surviving, the city’s Fortuna Casino and the casino at the Ponte 16 resort would “likely keep their status-quo given their operational excellence,” noted the CLSA analyst.
“We estimate the three casinos delivered net profits of HKD310 million [US$39.5 million], HKD62 million and HKD228 million in 2024, respectively, according to annual reports of their respective casino managers,” he added.
Regarding gaming table reallocation – if the Macau government allows gaming tables from the shuttered satellite venues to go to the relevant concessionaire – upgrades in table yields are “theoretically possible” for Galaxy Entertainment, SJM Holdings and Melco Resorts.
“Assuming an incremental daily gross table yield of HKD76,318 per table per day – being the difference between the highest and the lowest yield in Macau in 2024 –, this means a net table yield of HKD34,343 per table per day after deducting gaming tax and our estimates for rebates and players reinvestments,” wrote Mr Kiang.
He added: “If each table accommodates one dealer for three shifts daily, this means a total incremental monthly salary of HKD78,222 per table per month. As such, the payback threshold is 2.3 days in such case.”
But the analyst cautioned: “The economics is sound, though this is predicated on the ability to drive higher table yield by operating in-house by concessionaires.”
