GGRAsia – Suncity Macau VIP share down even prior Chau case: analyst

Suncity Macau VIP share down even prior Chau case: analyst

Nov 29, 2021 Newsdesk Latest News, Macau, Top of the deck

The Suncity Group junket brand’s share of Macau VIP gambling business had “plummeted” even in the months prior to boss Alvin Chau Cheok Wa being detained on Saturday over a probe into alleged promotion of illicit gambling, said a Monday note from brokerage Sanford C. Bernstein Ltd.

In pre-pandemic times, the share of the Macau junket trade held by Mr Chau’s Suncity Group brand had been “45 percent” of a significant market, said the memo from analysts Vitaly Umansky, Louis Li and Kelsey Zhu.

“However, over the last months, Suncity’s share has plummeted to about 20 percent” of an already-constrained market, suggested the analysts.

“Part of the decline” stemmed from Suncity Group’s “prior aggressive expansion and building a riskier junket business model compared to some other Macau junkets that have taken more cautious approaches,” the analysts added.

It was reported on Monday that Mr Chau had been placed in pre-trial detention in Macau, following a decision by a local judge. He has been questioned on local allegations of being a member of a criminal group, of illegal gambling, and of money laundering.

The junket business in Macau was “on its way to being a shell of its prior self” in any case, furthered the Sanford Bernstein analysts in their Monday memo, adding there would be “no turning back” from such a decline.

The analysts said that while they acknowledged this might “raise concerns” among watchers of the industry, it was “important to understand” that junkets “represented approximately 33 percent” of casino gross gaming revenue (GGR) in 2019 and “less than 15 percent” of earnings before interest, taxation, depreciation and amortisation (EBITDA) in the Macau gaming sector.

Third-quarter data on the gaming market segments, issued by the Macau government in mid-October, showed that VIP baccarat, which in 2019 represented nearly half of all Macau GGR, accounted for 31.8 percent of the city’s casino GGR in the three months to September 30, at MOP5.96 billion (US$741.9 million). That was a decline of 29.9 percent from the preceding quarter.

“As junkets shrink, some players may well shift to premium mass, which will help drive that segment,” suggested the Sanford Bernstein analysts in their Monday note.

They were referring to a player segment said to bet with cash chips, on live-dealer games with minimum bets typically denominated in thousands of Hong Kong dollars in the Macau market.

Mr Umansky and his colleagues did note that there might be “some concern that Suncity’s situation will cripple liquidity in Macau”.

They added: “This may be the case for junket business over the next few months. There may be some temporary impact on premium mass. However, we expect mass and premium mass to be largely unaffected in the long run by these junket problems.”

The “key” for Macau would be “travel recovery and Chinese authorities allowing money movement into Macau in a reasonable manner to provide liquidity” for the mass segment of players, said the brokerage.