Neptune Group Ltd, a Hong Kong-listed investor in the Macau VIP gambling sector, has seen “a glimmer of hope” in the past six months, “as revenue rebounded in Macau’s gaming sector”.
So said the firm’s chairman Danny Xuda Huang, in commentary contained in its interim report for the six months to December 31, filed with the Hong Kong Stock Exchange on Thursday.
Neptune was once one of the largest investors in the Macau VIP gambling segment, according to investment analysts. But its fortunes have been hit by factors including China’s anti-graft campaign, which has seen a reduction in the volume of high-roller cash flowing through city’s junket rooms. The market has also seen a stretching of repayment periods on gambling credit issued to players, and higher levels of default than previously recorded.
In February, Neptune said it had made a modest net profit of HKD25.9 million (US$3.3 million) for the six months to December 31, 2016. That compared to a net loss of HKD257.0 million in the prior-year period.
“In the past six months, we reviewed the results of all our business partners and for those with positive cash flows, we demanded repayment for our profit share,” said the chairman in his commentary filed on Thursday.
He added, referring to ensuring Neptune received income: “The process has not been an easy task as these businesses remained in operating losses.”
He further stated: “We thank our management and staff for their persistent effort in recovering receivables.”
The company had said in its unaudited results filed in February that its outstanding debt had declined from HKD654 million in 2015 to HKD363 million in 2016.
“We hope diversification in other business sectors shall reduce our dependence on gaming, so as to minimise the impact of ongoing negativity in Macau’s gaming in a worst case scenario,” stated the chairman.
He added: “The moneylending business is at the moment one of our initiatives and management remain focused to kick-start this operation.”
Neptune’s interim report didn’t mention how many VIP rooms and tables the firm had a business association with.
But it did say that during the reporting period it had rights in sharing profit streams from four junket businesses: Hou Wan; Neptune Ouro; Hao Cai; and Hoi Long.
The four combined, produced a profit stream entitlement to Neptune for the six months to December 31 amounting to nearly HKD468.58 million. That was only 38 percent of the nearly HKD1.23 billion profit stream entitlement – less amortisation and impairment loss – of the group as of July 1, 2015.
“Prior to 1 July 2015, the directors considered that the useful life of the group’s intangible assets – which represented the rights in sharing of profit streams from junket businesses at the respective casinos’ VIP rooms in Macau – was indefinite because the directors expected that the intangible assets could contribute cash flows to the group indefinitely,” Neptune said in its interim report on Thursday.
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Analyst at Union Gaming Securities Asia