Junket operation review added in at the last minute

　　Macau's govt today published its mid-term review of the gaming concession 2002-2022). The review has no major surprises. It recognizes that the gaming sector has benefited the local economy, and non-gaming has been successful. That said, we believe that the govt may be paving its way for more regulations on junket operators and VIP gaming, as the govt specifically added a section in the review on this. For example, the govt had just banned phone-betting in VIP rooms this week, though the impact is likely small (2-3% of EBITDA). At the current valuation of 13x DBe 2016 EV/EBITDA (12x DBe 2017 EV/EBITDA), sector valuation is largely within its historical trading range.

　　9 topics covered; junket operations review added as key content

　　The aim of the review was to assess whether the six gaming operators fulfilled their obligations under the concession contracts. The govt clarified that the results of the review will not have a direct impact on renewal of the six gaming operators’ concessions, which are due to expire in 2020-22. Topics covered were: i) development of the gaming industry, ii) its economic impact on Macau, iii) impact on the SME sector, iv) impact on Macau’s society, v) relationship between the gaming and non-gaming sector, vi) whether gaming operators are complying with the terms in their contracts, vii) the operations of gaming companies, and viii) whether gaming operators are fulfilling their social responsibilities. On top of these, the Macau govt added a topic at the last minute: the development and operating status of gaming promoters (junkets).