Casino operator Wynn Macau Ltd says it is facing “several lawsuits” in Macau’s Court of First Instance “by individuals who claim to be investors in or persons with credit in accounts maintained by Dore Entertainment Co Ltd”, an operator of Macau gambling junkets.
The information was in Wynn Macau’s unaudited interim report for the six months to June 30, filed with the Hong Kong Stock Exchange after trading hours on Thursday.
In early September last year, Dore Entertainment confirmed reports it had allegedly been a victim of internal fraud by a former employee. The VIP gambling promoter did not confirm the amount of money involved.
“The principal allegations common to the lawsuits are that [Wynn Macau's subsidiary Wynn Resorts Macau], as a gaming concessionaire, should be held responsible for Dore’s conduct on the basis that Wynn Resorts Macau is responsible for the supervision of Dore’s activities at Wynn Macau [casino hotel] that resulted in the purported losses,” added the casino operator’s latest filing.
As of September 16 last year, complaints made to the Macau police from those claiming to be investors in the cage operations of Dore Entertainment amounted to at least HKD330 million (US$42.6 million).
Wynn Macau said in its Thursday filing that – based on legal advice – it believed the specific claims faced by the company were “devoid of merit and are unfounded”.
“The company intends to vigorously defend Wynn Resorts Macau in the lawsuits. The lawsuits are only in the early phases of litigation,” added the casino company.
Wynn Macau stated in its Thursday filing: “In connection with the alleged theft, embezzlement, fraud and/or other crime(s) perpetrated by a former employee of Dore… the plaintiffs of the lawsuits allege that Dore failed to honour withdrawal of funds requests that allegedly has resulted in certain losses for these individuals.”
The firm said that on September 14 last year it had made a voluntary regulatory announcement in connection with what it termed “the Dore incident”. At the time, the casino operator highlighted that Dore Entertainment was “an independent, registered and licensed company”.
“Any matters related to Dore’s alleged failure to honour withdrawal of funds requests are related to Dore’s direct financial relationships with the parties requesting such withdrawals and accounts maintained directly between Dore and such parties,” Wynn Macau stated in its September 14 release.
Wynn Palace a positive: Telsey
In other developments, brokerage Telsey Advisory Group LLC gave an upbeat assessment on the prospects for Wynn Palace – a Cotai casino resort from Wynn Macau, and which is to open on August 22.
In notes issued recently, several other brokerages had expressed caution on the likely performance of Wynn Palace and how much it could help the overall Macau casino market in the current challenging trading conditions.
But David Katz and Brian Davis of Telsey said in a Thursday note: “We believe the opening should be a positive event for the company and its targets are achievable.”
The Macau government last week said it had approved 100 new-to-market live gaming tables for the opening of Wynn Palace; all for the mass-market segment. The company would be granted an additional 50 new-to-market tables in two separate phases: 25 tables on January 1, 2017; and the remaining 25 on January 1, 2018.
The number of new-to-market tables granted to Wynn Palace is considerably lower than the 250 gaming tables allocated to, respectively, the opening of Galaxy Macau Phase 2, developed by Galaxy Entertainment Group Ltd; and to Studio City, majority owned by Melco Crown Entertainment Ltd. Both properties opened in 2015.
Mr Katz and Mr Davis stated, referring to the tables issue: “We do not believe that the table allocation for the [Wynn] Palace is a significant surprise and a major negative for the story and had been contemplated by the company previously. First, the low utilisation rates currently in the market, particularly in VIP, and which are expected to move lower at the [Wynn Macau] peninsula property support the view that there is a cost reduction benefit to the lower table count. Second, we believe that the primary driver of revenue and profit growth in the market at present is visitation and spend per visitor rather than the supply of tables.”
Referring to Wynn Macau’s parent, Wynn Resorts Ltd, the brokerage added: “Assuming Wynn can execute as expected, the growth rates and inflection points in financial metrics suggest the shares are undervalued.”
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Direct taxes on gaming collected by the Macau government in full calendar year 2018