GGRAsia – VinaCapital ideal partner for Vietnam casino: brokerage

VinaCapital ideal partner for Vietnam casino: brokerage

Apr 14, 2016 Newsdesk Latest News, Rest of Asia, Top of the deck

While foreigner-only gaming in Vietnam is a less than optimal environment for a multibillion U.S. dollar casino investment, a recently announced scheme there involving Macau junket investor Suncity Group “has a chance”, says brokerage Union Gaming Securities Asia Ltd

“There is probably no better local partner than VinaCapital. In a market like Vietnam, having a high-powered, well-connected, local partner is critical. This could be particularly instrumental in (eventually) obtaining approval for locals gambling,” said Union Gaming analyst Grant Govertsen in a note on Wednesday. He was referring to VinaCapital group, a major investment management and real estate development firm in Vietnam.

His remarks came in an update on a US$4-billion Vietnam casino project reportedly also involving Macau junket investor Suncity Group and Hong Kong-based Chow Tai Fook Enterprises Ltd.

The partners will soon start construction on a planned casino resort near Hoi An, in Vietnam’s Quang Nam Province in the central coastal region, according to a local media outlet.

Chow Tai Fook acquired a controlling stake in the casino resort scheme in September 2015. The seller was VinaCapital group, which nonetheless remained connected to the project.

This is not the first casino project that Chow Tai Fook has pursued. The firm is also involved in the development of a casino resort in Brisbane, the capital of the Australian state of Queensland.

Commenting on the specifics of the Vietnam scheme, Union Gaming said: “We don’t love the foreigners-only concept in Vietnam, although with the right set of circumstances we think the Hoi An project has potential based on the phase one cost.”

The first phase of the project would cost US$500 million and should be completed in the first quarter of 2019, the local media report had stated.

The brokerage noted: “We would expect future phases – in order to reach the US$4 billion minimum investment requirement – to come in the out years and to be ‘bought down’ by residential sales.”

Mr Govertsen stated: “Chow Tai Fook and Suncity bring access to the world’s deepest pool of gamblers given that Suncity is Macau’s number one junket by volume.”

Chow Tai Fook is a privately held conglomerate controlled by the family of Hong Kong businessman Cheng Yu Tung. Mr Cheng is a long-standing business partner of Stanley Ho Hung Sun, a founder of Macau casino investor SJM Holdings Ltd.

Mr Govertsen added, commenting on the location of the proposed scheme: “The adjacent resort towns of Da Nang and Hoi An, are a playground for Vietnam’s wealthy with significant amounts of resort real estate development held primarily by Vietnamese. As a preferred vacation destination, along with easy access via airlift, a potential future ‘locals licence’ would likely capture a significant amount of domestic high-end play.”

Competition for Macau

The brokerage did however note that new casino projects across the Asia Pacific region either involving Macau VIP junket investors or targeting Asian VIP players “aren’t making the VIP story in Macau any rosier”.

One of the new projects already operating – albeit in a temporary venue – is from Imperial Pacific International Holdings Ltd and is based in Saipan, in the U.S. Commonwealth of the Northern Mariana Islands. It could end up costing Macau the equivalent of 200 basis points of casino gross gaming revenue (GGR) this year, based on its announced unaudited US$6.1 billion rolling chip turnover for the first quarter, said Union Gaming.

“As has been witnessed recently in Saipan, Imperial Pacific (not affiliated with Suncity) generated US$6.1 billion in rolling chip volume in first quarter 2016, which is north of what many casinos in Macau are generating these days,” stated Mr Govertsen.

Mr Govertsen added: “It is becoming apparent that select Asian casinos are putting a dent in Macau’s VIP story. Based on Imperial Pacific’s current run-rate, and assuming its volume represents play entirely ripped out of Macau, this alone would have a nearly 200 basis points negative impact on Macau’s GGR [gross gaming revenue] growth rate this year.”

Imperial Pacific announced in October that it was terminating a loan agreement and profit transfer agreement with Macau casino junket Hang Seng, also known as Hengsheng Group or Heng Sheng Group. Imperial Pacific stated at the time – in relation to the move – that “the downturn of Macau gaming business is expected to continue”.

A local newspaper reported that Imperial Pacific had last week been authorised by Saipan’s gaming regulator, the Commonwealth Casino Commission, to increase the rebate percentage rate available under its rolling chip programme to 1.8 percent from 1.3 percent.

According to Imperial Pacific, “since November 2015, approximately 200 top-tier high rollers have visited our temporary casino in Saipan, many of whom have become return customers.”