The VIP gaming market in Macau saw improved performance in the third quarter, a momentum that is likely to be sustained in the fourth quarter. So said Kwok Chi Chung, president of the Association of Gaming and Entertainment Promoters, in comments to GGRAsia. The body represents organisations licensed by the Macau government to organise credit and arrange collection on any player losses generated by high roller play; businesses commonly referred to as junkets.
“I wouldn’t say the VIP gaming segment here has recovered, but at least it has seen some improvements and stability in terms of earnings,” Mr Kwok remarked to us in an interview.
The official third-quarter numbers on the split between Macau’s VIP casino gross gaming revenue (GGR) and the mass-market variety are due to be released next week by the local regulator, the Gaming Inspection and Coordination Bureau.
In the second quarter, casino gross gaming revenue (GGR) in Macau’s VIP segment fell 15.7 percent year-on-year, according to data released in July by the gaming bureau.
In August and September respectively, the overall GGR number expanded year-on-year after 26 months of GGR contraction. Several investment analysts – citing unofficial data – have indicated that September in particular benefited from recovery in VIP and also in premium mass; the latter a form of high-stakes play paid for in cash by the customers, rather than on credit in the manner of VIP play.
The second half improvement in Macau VIP “mainly has to do with the fact that the economy of mainland China has improved: for instance, the recent warming of the property market there did help boost the liquidity of our clients,” Mr Kwok stated.
“The junkets have got more confident in extending credit to clients, and it has been a bit easier for them to collect [gambling] debts,” he added.
The support from the junkets’ “loyal clients” – including play at the city’s new casino resorts; Wynn Palace which opened on August 22, and the Parisian Macao which launched on September 13 – had helped boost the business performance of the city’s biggest junket firms, Mr Kwok stated.
Macau’s VIP gaming promoters receive from their casino operator partners either a share of VIP revenue or a commission on the amount of rolling chip turnover generated from VIP play.
Caution on credit
Mr Kwok said – referring to a term used by the Macau government to refer to the cooling in the Macau casino gambling market seen since 2014: “After going through the past two years of the adjustment phase, the junkets here have largely adjusted [coped] and improved the ways they extend credit.”
He further noted: “They know better which clients can be trusted.” This had helped to bring some stability to the high roller portion of the local gaming market, indicated Mr Kwok.
An October 2 note from analysts DS Kim and Daisy Lu of JP Morgan Securities (Asia Pacific) Ltd – quoting unofficial industry data – said September marked the first time in 29 months that Macau had posted a year-on-year expansion of VIP revenue.
The JP Morgan analysts estimated the VIP segment in September rose circa 5 percent year-on-year, versus year-on-year declines of circa 10 percent in July and August.
“We expect the VIP revenue for October will be more or less the same as the previous year – there has not been any particular stimulant in the period,” remarked Mr Kwok. He declined to comment on whether there might be a negative impact on VIP casino GGR in October because of Chinese Premier Li Keqiang’s three-day official visit to Macau that was scheduled to end on Wednesday. A number of investment analysts had mentioned in notes on Tuesday that possibility.
Mr Kwok merely noted: “If the economy of China remains stable the rest of year, the VIP segment here will also likely be steady.”
The junket association’s frontman estimated that currently Macau has more than 90 junket operators, even after taking into account the recent closures of VIP rooms announced by Nasdaq-listed VIP gambling room investor Iao Kun Group Holdings Ltd. Not all licensed gaming promoters are members of Mr Kwok’s grouping, but most are.
“In the past few months, we did see closures of some medium-sized or small junkets like [several promoted by] Iao Kun in here [Macau]. They shut down due to insufficient [operating] capital, or not having been successful in collecting debts,” Mr Kwok said.
Iao Kun announced on September 2 a “comprehensive strategic review” of its operations in Macau in order to “enhance its operating performance”. The move would also help “preserve our capital,” said Lam Man Pou, its chairman.
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"Given the opaque nature of the VIP segment (56 percent of gross gaming revenue in first quarter 2017), forecasting Macau GGR with a fair amount of certainty is difficult; therefore, we remain cautious"