The announcement of stricter accounting rules for junket operators in Macau starting next year “is incrementally negative to the sector as the increased scrutiny comes at a time of continued business challenges for the segment as a whole,” said brokerage Daiwa Securities Group Inc.
“As such, we do not rule out the possibility of a potential renewed and accelerating junket attrition in the coming months,” analysts Jamie Soo, Adrian Chan and Jennifer Wu wrote on a Friday note. “The potentiality of this outcome may result in a further decline in the junkets’ overall liquidity which implies a potential further leg down to VIP volumes in 2016,” they added.
The Macau government earlier this month introduced new guidelines to improve transparency in the junket sector. The city’s Gaming and Inspection Coordination Bureau said all junket operators will have to compile monthly accounting reports starting next year. Junket operators will also have to file with the gaming regulator details on the key personnel in charge of financial operations.
The announcement of new guidelines for the junket sector followed an alleged fraud amounting to tens of millions of U.S. dollars that rocked the Macau VIP gaming segment in September. Macau junket operator Dore Entertainment Co Ltd, which operates VIP facilities at Wynn Macau, announced it had been a victim of internal fraud by a former employee.
Dore said in a statement that a former cage manager “allegedly used her power to conduct unauthorised actions without the company’s knowledge”.
“Some form of policy tightening on junkets was, to some degree, expected post the Dore incident,” the Daiwa team said in its Friday note. The brokerage added it remained “cautious” on the Macau junket sector.
Gross gaming revenue (GGR) in VIP gaming – a segment heavily reliant in Macau on junket operators – fell by 38.0 percent year-on-year across the whole Macau market during the third quarter of 2015, according to official Macau government data. VIP revenue accounted for 53.32 percent of casino GGR in the three months to September 30, down from 55.51 percent in the previous quarter and from 56.45 percent in the prior-year period.
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Analyst at Roth Capital Partners