The United Arab Emirates’ launch of its website detailing commercial gaming licensing procedures should help ease any investor concerns about Wynn Resort’s project on Al Marjan Island and for other integrated resorts, according to a Wall Street analyst.
John DeCree, director of equity research at CBRE, released a report to investors over the weekend highlighting the General Commercial Gaming Regulatory Authority (GCGRA), the federal regulator of the UAE, launching its website, detailing licensing procedures and profiling key regulatory personnel. It also announced the recipient of the UAE’s first federal lottery license to the Game LLC, a subsidiary of Abu Dhabi-based company Momentum. It will operate as UAE Lottery.
“The official website and publication of licensing procedures are major steps forward, adding validity and transparency to the process,” DeCree said. “This should further alleviate skepticism in the investment community regarding legalized commercial gaming in the UAE.”
DeCree wrote that now that the GCGRA’s website is live and the licensing process is laid out, the investment opportunity for equity and credit investors should start to become more of a reality, specifically for Wynn Resorts. Despite Wynn’s construction progress at Wynn Al Marjan Island, investors have been reluctant to incorporate its potential in equity valuation, which “we attribute mostly to skepticism related to regulation. This weekend’s regulatory progress could also bring Wynn’s debt financing for Al Marjan Island closer to fruition.”
Wynn has a 40% stake in the $3.9 billion resort. CBRE previously issued a report suggesting that the UAE is the “next gaming frontier, a marketplace that could generate $8.5 billion in gaming revenue, rivaling Las Vegas and margins rivaling Singapore. All seven emirates are included in licensing, but Abu Dhabi, Dubai, and Ras Al Khaimah are considered the primary ones interested in expanding, DeCree said.
“We continue to believe the UAE is one of the most attractive global gaming opportunities today,” DeCree said. “The GCGRA is staffed by well-known and experienced gaming veterans and has been working expeditiously to craft industry-leading regulations, which are now becoming visible. The incremental thoroughness and depth of the licensing process laid out should be well-received by the investment community that has been seeking transparency on this global gaming expansion opportunity.”
Former MGM Resorts International CEO Jim Murren is chairman of the UAE’s gaming regulatory authority. The body also disclosed its board of directors that pulls heavily from Nevada: former Gaming Control Board Chairman Mark Lipparelli; former president and COO of Infinity World Development Corp. William Grounds who managed CityCenter holdings; and Vice Chairman Chris O’Donnel served as CEO of major UAE firms such as Emaar Developments. He also served on various boards with significant gaming investments, including Dubai World, CityCenter Holdings, and Kerzner Group.
DeCree said the website references a “Federal Law by Decree” and “Chapter 17 of the GCGRA Executing Regulations on Commercial Gaming,” but these official documents are not yet public. The GCGRA’s licensing procedures also reference “land-based gaming facilities,” which DeCree said supports the notion of integrated resorts in the UAE. Commercial gaming is defined as slots, table games (blackjack, roulette, baccarat, craps, poker), lottery, internet gaming, and sports wagering.
“Key economic details like gross gaming revenue and tax/royalty rates remain undisclosed. However, we did identify some useful information about the licensing framework,” DeCree said. “It appears gaming licenses could be perpetual, provided the operators remain compliant. Although there seems to be an initial term with a license expiration, the license renewal process appears more administrative in nature. This would make the UAE licensing environment more akin to Nevada, rather than the concession models in Macau and Singapore. If this is the case, we believe public investors could assign higher valuation multiples to UAE commercial gaming operations relative to jurisdictions with less predictable or more competitive renewal procedures.”
Given the religious objections to gaming, DeCree expected restrictions on locals, but the regulatory body didn’t include any. The Games LLC website said it would provide lottery games for both residents and tourists. He added, however, that there are some advertising restrictions for gaming operators, especially when it comes to using UAE or cultural symbols. There is also a limitation on any advertising in Arabic.
DeCree said that since CBRE representatives visited the UAE and met with key stakeholders in the market, they’ve held the view that the lottery is “a natural first course” of legalized gaming, given its prior gray-market operation and customer acceptance. Despite the first license being awarded to a local company, they don’t believe anything precludes opportunities for larger international lottery operators to forge local partnerships, common in other lottery jurisdictions.
“Given the Game LLC does not provide any direct public investment opportunities, we view the initial news more as a confirmation to the ongoing development of the UAE’s commercial gaming market,” DeCree said.
