Dore Entertainment Group Ltd contributed only approximately 4 percent of casino resort Wynn Macau’s annual earnings before interest, taxation, depreciation and amortisation (EBITDA) even before an alleged large theft of capital by a junket employee, said a note on Monday from Credit Suisse AG in Hong Kong.
“Even if we conservatively assume the [Dore] business dropped by half, its annualised EBITDA impact would be HKD120 million [US$15.5 million] or 2 percent of our expected HKD5.2 billion EBITDA for Wynn Macau in 2015,” wrote analysts Kenneth Fong and Isis Wong.
Macau junket operator Dore has confirmed allegations it has been a victim of internal fraud by a former employee. The junket operator however did not confirm the amount of money involved.
David Bain of brokerage Sterne Agee CRT said in a note on Monday: “Our checks cite approximately HKD270 million or US$35 million (far from the up to HKD2 billion in some reports) was lost. Of note, police notices were officially filed by 24 investors/depositors.”
Wynn Macau Ltd, operator of Wynn Macau, issued on Monday a voluntary statement to the Hong Kong Stock Exchange saying Dore “owes no money to the company”.
“The company hopes that all parties will be able to resolve their differences in the near future. The company will continue to monitor the situation,” stated Wynn Macau.
A number of investment analysts have said Dore was operating 25 tables at Wynn Macau.
“According to our check, Dore VIP room is still in operation,” wrote the Credit Suisse team on Monday.
Credit Suisse added that according to its inquiries, the Dore VIP facilities at Wynn Macau in total generated around HKD7 billion of rolling chip turnover in August. It said this was equivalent to HKD200 million VIP gross gaming revenue (GGR) at a 2.85 percent win rate or HKD20 million of EBITDA a month, assuming a 10 percent margin.
“The key risk is that there is contagion to other junkets over concerns from agents and junket investors about junket liquidity,” said brokerage Sanford C. Bernstein Ltd in a note issued from Hong Kong on Monday.
“We would caution investors on over exposure to operators with large junket VIP business, given the continued uncertainty surrounding junket operations,” said the brokerage’s analysts Vitaly Umansky, Simon Zhang and Bo Wen.
Credit Suisse said in its view the Dore case did not have parallels with the April 2014 case of a junket firm called Kimren, where Huang Shan, one of the principals, reportedly accepted a lot of side bets and outside deposits and was reported to have absconded with HKD8 billion to HKD10 billion.
Mr Bain of Sterne Agee CRT said: “We believe six junkets account for over 80 percent of the VIP market in Macau (the list does not include Dore) and those groups are mostly capitalised with retained earnings, not new investors.”
In other developments, Sino Credit Holdings Ltd, a Hong Kong-listed firm with interests in pawnbroking and lending operations in mainland China, on Monday morning suspended its shares and issued a statement after the close of business that day saying it had not been involved in Macau junket operations since 2013 or with Wynn Macau since 2010. Its shares were due to resume trading at market opening on Tuesday.
The company was formerly known as Dore Holdings Ltd and changed its name to Sino Credit Holdings Ltd in January 2014.
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"The demographics of Tokyo, Yokohama, and Osaka (possible Japanese urban gaming resort locations) warrant larger gaming floors [than 15,000 square metres]"
Analyst at investment research firm Morningstar