Neptune Group Ltd, a Hong Kong-listed investor in the Macau VIP gambling sector, recorded a net loss of HKD257.0 million (US$33.1 million) in the second half of 2015. The firm had reported a profit of HKD130.9 million in the prior-year period.
The firm’s financial performance for the six months ended December 31, 2015 was negatively impacted by an impairment loss on intangible assets of HKD277.3 million following a valuation report on the firm’s gaming business.
Revenue from commissions on rolling chip turnover in the VIP rooms promoted by Neptune’s associates decreased by HKD151 million – or 53 percent – to HKD133 million during the period, the firm said in a Monday filing to the Hong Kong Stock Exchange.
Neptune attributed the decline to the ongoing slump in Macau’s high roller gaming sector. Market wide gross gaming revenue from VIP baccarat – the city’s main gauge for the VIP gaming segment – decreased by 36.9 percent in year-on-year terms in the second half of 2015, according to data from the Macau casino regulator.
Neptune’s Monday announcement did not disclose the number of VIP gaming tables or VIP rooms promoted by the firm’s associates. Neptune stated in its annual report for the year ended June 30, 2015 that its operations involved a total of 73 tables.
“The… anti-corruption cases in China reportedly forced indirectly a… contraction in Macau’s gaming industry, with news of VIP room closures and even some major operators going out of business,” Neptune stated in its Monday announcement.
The firm added that further devaluation of the renminbi against the U.S. dollar and a softening of China’s economy also posed risks for the VIP sector in the near future. Neptune stated none of its VIP junket operators could be sure when a rebound in business might occur.
Most mainland Chinese players’ assets are denominated in Chinese currency, while Macau bets are usually denominated in Hong Kong dollars, a currency pegged to the U.S. dollar.
Neptune said the firm was implementing a “cluster of policies” to respond to the “seismic change” in the VIP gaming market and diversify its business portfolio. The group stated it was exploring new opportunities in money lending and property investment, taking advantage of the ongoing decline in real estate prices in Macau.
The firm said its existing business model was no longer sustainable under the current environment. “The hope is our new business strategy… will provide us some much needed leeway to weather such a tough moment,” it added.
Neptune stated it was urging associate junket operators to take measures to speed up collection of credit extended to VIP players and reduce bad debt. “But the distress is still hanging on”, it stated.
The firm added: “[Junkets] need to [package] their bad debts and distressed assets and [sell] them to third-party financial investors at a big discount.”
Neptune also noted there was now more competition among junkets to attract high rollers, adding that there were fewer such players available than previously.
The firm warned that the ongoing economic slowdown in mainland China could extend its impact to other sectors beyond VIP gaming. The firm said however that, when China’s economy stabilises, Macau’s gaming sector would return to growth mode.
Neptune did not recommend the payment of a interim dividend for the second half of 2015.
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Total spending – excluding gaming expenses – of visitors to Macau in the second quarter of 2017