IAG December 2015

Cover Story
Buying the
house
Is casino ownership the
next step in Macau junket
promoters’ evolution?
By Muhammad Cohen, Editor At Large
Muhammad Cohen also
blogs for Forbes on gaming
throughout Asia and
wrote Hong Kong On Air, a
novel set during the 1997
handover about TV news,
love, betrayal, high finance
and cheap lingerie.
Junket promoters say they’re bearing the brunt of
Macau’s gaming slump. VIP revenue fell 11% last year
and 41% through the first three quarters of this year,
well ahead of Macau’s overall decline. Union Gaming
Securities Asia estimates VIP play now constitutes less
than half of Macau’s gross gaming revenue, factoring in mass tables
moved to VIP to beat the smoking ban, down from 73% in 2011.
Many high rollers have stopped coming to Macau or substantially
cut back on their play amid China’s anti-corruption crackdown and
greater scrutiny of money transfers. Debt repayments to junkets
have slowed and assets securing loans have lost value. The theft
from junket room operator Dore Group in September, after last
year’s US$1.3 billion heist by junket promoter Huang Shan, reminds
investors that junkets pay interest rates as high as 2% a month
precisely because providing capital to VIP rooms is risky. In the wake
of the Dore scandal, Macau authorities are requiring more financial
disclosures by junkets. To rub it all in, Melco Crown opened Studio
City in October without VIP rooms, focused solely on higher margin
mass market play.
Junket promoters have reduced their Macau operations over
the past 18 months and some of the smaller ones have closed
shop. Top five junket Neptune Group, in its annual report released
in September, calls its liquidity position “extremely vulnerable” and
they have contemplated pulling out of Macau. While some analysts
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inside asian gaming December 2015