Macau’s December casino gross gaming revenue (GGR) is likely to be down 68 percent compared to the pre-pandemic trading conditions of December 2019, but up 8 percent month on month, as the mass-gambling market “improves” but VIP gambling “faces headwinds,” says a Wednesday note from brokerage Sanford C. Bernstein Ltd.
Macau market recovery in December is likely to be driven by the “mass and premium mass” gambling segments as well as by non-gaming products and services, “and in the long-run should offset the negative profitability impact from junket retrenchment,” stated the brokerage’s analysts Vitaly Umansky, Louis Li and Kelsey Zhu.
The memo was issued the day Macau reported casino GGR for November up 54.6 percent month-on-month.
The same day, JP Morgan Securities (Asia-Pacific) Ltd said in a memo it was “probably reasonable to assume” that VIP gambling from junkets in the Macau market would “go to near-zero levels ultimately”.
The commentary from DS Kim, Amanda Cheng and Livy Lyu was in the wake of the detention on Saturday in Macau of Alvin Chau Cheok Wa, boss of the Suncity Group brand of junkets, on suspicion of facilitating illegal gambling by customers from mainland China, including online gambling via the Philippines.
On Wednesday, Suncity Group shut all its VIP gaming rooms in the Macau market.
“We think the message from the [Chinese central] government is clear, in that junkets’ proactive gambling promotion – such as credit extension and foreign exchange transfer, among others – for mainlanders will not be tolerated,” said JP Morgan.
This would “not only cripple junkets’ ability to bring VIP players to any jurisdictions, including Macau, but also prompt casino operators to reconsider their relationship/association with junkets… especially into this critical licence renewal period,” added the institution.
The latter was a reference to the expiry in June 2022 of the Macau gaming rights of the current six operators, and the regulatory arrangements for handling that event.
JP Morgan added: “Ultimately, we can envision Macau junkets becoming similar to ‘international market agents’ in Singapore, which are heavily vetted and highly regulated.”
Such a setup might see such junket-based VIP business in Macau “shrink to near-zero levels”.
This, said JP Morgan, was not a “significant deal”. The institution said it had already “modelled VIP only driving 1 percent to 4 percent” of Macau operators’ earnings before interest, taxation, depreciation and amortisation in 2023 “and onward,” the equivalent of circa “2 percent of sector profits”.
