Between 15 percent and 30 percent of what has been junket-managed VIP gambler business in Macau could migrate either to casino-managed VIP play or so-called premium mass, amid the shakeup of the city’s junket sector, says a Wednesday note from brokerage Sanford C. Bernstein Ltd.
Analysts Vitaly Umansky and Kelsey Zhu said there might also be “some negative impact on premium mass” from what it termed “the disappearance of junkets”.
The institution quantified the impact in terms of 10 percent to 25 percent of the previous “ultra premium mass” segment, and 5 percent to 10 percent of the premium mass segment. Sanford Bernstein cited “junket liquidity” or absence thereof, as a factor.
“Based on our analysis we estimate overall pro forma” gross gaming revenue (GGR) in Macau “could be between US$25.1 billion to US$28.8 billion,” annually, i.e., down 31 percent to 21 percent compared to 2019, wrote the Sanford Bernstein team.
The premium mass segments have been described by a number of industry analysts as involving high-stakes play, typically in thousands of Hong Kong dollars per hand, but on a cash play basis with cash chips, rather than credit issued for use of so-called rolling chips.
The detention in Macau last month of Alvin Chau Cheok Wa, head of Suncity group, and 10 other people, on suspicion of enabling cross-border online gambling by mainland players, meant “the death blow has been dealt to the junket system in Macau as we have known it for nearly 20 years,” stated the brokerage.
But Sanford Bernstein said contribution to the industry in 2019 in the form of earnings before interest, taxation, depreciation and amortisation (EBITDA) was below 15 percent, “due to the significant margin differential between VIP and the mass”.
Sanford Bernstein said among the six Macau operators, Sands China Ltd has had the least GGR exposure to VIP, at only 26 percent, while Wynn Macau Ltd, Galaxy Enterainment Group Ltd and Melco Resorts and Entertainment Ltd had higher VIP exposure at 49 percent, 48 percent and 45 percent, respectively.
The brokerage stated: “While the VIP exposure looks negative for these operators, it is important to remember that profit contribution from VIP was much lower at only approximately 15 percent for the entire group of companies.”
