Macau’s top-six VIP casino gaming promoters control 76 percent of the market’s rolling chip volume, suggests a research report from Daiwa Securities Group Inc. It adds some hard-number estimates – including the number of tables controlled by each of the six – to a previously hazy market segment. Daiwa describes its junket ranking by VIP roll as a ‘watch list’ of the Macau VIP industry.
Gross gaming revenue (GGR) for VIP baccarat – another measure of the high roller business – stood at MOP212.54 billion (US$26.6 billion) for the whole of 2014, according to Macau government data released earlier this month. It accounted for 60.5 percent of the total casino GGR in 2014.
The number of licensed gaming promoters in Macau – also known as junkets – shrank by 34 or almost 16 percent over the past 12 months from the previous market total of 217, according to figures updated earlier this month and obtained by public broadcaster Rádio Macau.
Manuel Joaquim das Neves, director of Macau’s gaming regulator – the Gaming Inspection and Coordination Bureau (DICJ) – was quoted on Tuesday saying the loss of some smaller junkets should not be a cause for special concern.
“Those were small-size gaming promoters that already had no activity and that didn’t come to renew their licences. The issue deserves no special attention,” Mr Neves told Ponto Final newspaper. The director added the official updated list of licensed junket operators should be made public soon. The list is published yearly in Macau’s Official Gazette.
Hong Kong-based Daiwa analysts Jamie Soo and Adrian Chan noted in their Monday research paper that even the big junkets still face tough trading conditions.
They stated: “We beg to differ with the common perception that the latest junket closures should weed out weaker players and spur healthy VIP segment consolidation, as: 1) we have not seen junket capital shifting from smaller to larger junkets, 2) surviving smaller junkets have adopted a cash-only model with low costs, little credit risk, and no incentive to consolidate, and 3) larger junkets still face a deteriorating climate and plan further cuts in VIP room numbers.”
Daiwa’s top-six list of junkets indicates that where gaming promoters are tied in terms of roll percentage, the ranking position is determined by the number of tables they control.
As expected, Suncity Group heads the list, with an estimated 25 percent share of the Macau market by VIP roll, and what Daiwa estimates are 219 tables. A total of 185 of those tables are said to be in nine major casinos, with a further 34 in so-called satellite casinos managed by third parties but using – according to Daiwa – the gaming licence of SJM Holdings Ltd.
Galaxy Entertainment Group Ltd also licenses some satellite properties, but there is no mention in Daiwa’s list of what junkets – if any – operate in those properties.
Alvin Chau Cheok Wa, chairman of Suncity, had been in talks with Hong Kong-listed International Entertainment Corp for it to buy a 70-percent economic interest in a junket-related entity called Suncity International Holdings Ltd. The latter was said in filings to be controlled by Mr Chau. A one-year exclusivity period for the talks lapsed on January 1 without any announcement of progress. International Entertainment is controlled by the family of Cheng Yu Tung – a long-time business partner of SJM Holdings’s founder Stanley Ho Hung Sun.
Second in Daiwa’s Macau junket league table is Guangdong Group – a successor to the Macau VIP business of Hong Kong-listed Neptune Group Ltd. Guangdong Group has 15 percent of the Macau VIP roll, although according to Daiwa it actually controls more tables than Suncity, with 228. Daiwa says Guangdong Group has 203 tables in 10 major casinos, and a further 25 in satellite venues of SJM Holdings.
The Wall Street Journal newspaper in December reported that businessman Cheung Chi Tai – once one of the biggest investors in Neptune Group – was being investigated by the Hong Kong police for alleged money laundering. Neptune Group said at the time that Mr Cheung had had no stake in Neptune’s listed entity since January 2014 and was no longer associated with its business.
The next four on Daiwa’s top-six Macau junket list are much smaller in table numbers than the ‘big two’ but appear to have strong yield from their table inventory judged by roll.
In third spot, Tak Chun Group has only 78 tables – around a third as many tables as Guangdong Group – but is only five percentage points lighter in roll, with 10 percent of the market. According to Daiwa, Tak Chun has 73 tables in six major casinos, and five in SJM Holdings satellites.
In fourth position is Golden Resorts Group with an estimated 10 percent of Macau VIP roll. Daiwa says the gaming promoter operates its 76 tables exclusively with SJM Holdings, including 52 tables in Grand Lisboa.
In fifth spot is David Group, with 8 percent of market VIP roll, although Daiwa says the tally includes some tables already scheduled to close at the end of January. Its tally as of Monday is said to include 78 tables at five major casinos, and six at SJM Holdings satellites.
In sixth spot among the biggest Macau high stakes gaming promoters, says Daiwa, is Hengsheng Group, with 8 percent of market VIP roll, and 75 tables – 61 of them in six major casinos and 14 in SJM Holdings satellites. In March 2014, Hengsheng sold a 5 percent share in its profits to Imperial Pacific International Holdings Ltd. The latter is planning to build a casino in Saipan, in the U.S. Pacific territory of the Northern Mariana Islands.
Sands China leads in direct VIP
Daiwa’s research also indicates that around 24 percent of Sands China Ltd’s VIP tables are directly managed by the house – i.e., 90 out of the estimated 369 VIP tables Sands China has.
Galaxy Entertainment has only 7 percent or 22 of its estimated 325 VIP tables directly managed by the house. Melco Crown Entertainment Ltd has 15 out of 216 directly managed, or 7 percent of the total. MGM China Holdings Ltd has 20 out of 200, or 10 percent, while Wynn Macau Ltd has 50 out of 214, or 23 percent.
Daiwa has no data regarding the question of directly managed VIP tables at Grand Lisboa or at those properties directly managed by SJM Holdings or at the SJM Holdings’ satellite properties.
Market-wide, Daiwa estimates there are 1,876 VIP tables in Macau. There were 5,711 gaming tables recorded in the Macau market by the gaming bureau as of December 31 – so assuming an apples-with-apples comparison, VIP tables are 33 percent of the total table inventory. Daiwa further estimates that there are 1,679 junket tables, indicating junket tables are 89 percent of all VIP tables. Directly managed VIP tables total 197, or 11 percent of all VIP tables, thinks Daiwa.
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”The [Macau] junket sector ... feels that more stringent requirements can enhance the reputation for the sector as a whole, so they [the junkets] are willing to comply with it in order for the sector to sustain a healthy development for the long term”
Paulo Martins Chan
Director of Macau's Gaming Inspection and Coordination Bureau