Macau Casinos Drop as Analyst Says Gaming Fell 19% Last Week

  • Gaming revenue hit as junkets cut gambler loans: Deutsche Bank
  • Reported theft caused junket investor withdrawals: analyst

Macau casino shares closed lower in Hong Kong after Deutsche Bank AG said gaming revenue was hurt last week due to a move by junket operators to reduce credit offered to high-end gamblers.

Gross gaming revenue fell 19 percent to 493 million patacas ($62 million) a day last week, or 18 percent below the average so far this quarter, Deutsche Bank AG analyst Karen Tang wrote in a note Wednesday. Junket operators reduced lending after a reported theft at a competitor "prompted others to withdraw deposits from various junkets," Tang wrote.

MGM China Holdings Ltd. fell 7.7 percent to HK$10.30 by the close of trading in Hong Kong, while Wynn Macau Ltd. fell 5.6 percent. and Galaxy Entertainment Group Ltd. was down 5 percent, SJM Holdings Ltd. dropped 5.8 percent and Sands China Ltd. lost 2.9 percent. The Bloomberg Intelligence Macau Gaming Index declined more than 5 percent to a three-year low.

Macau’s junkets bring in high-stakes bettors from mainland China, and often also provide gambling credit to VIPs, who account for about two-thirds of the city’s gaming revenue. China’s slowing economy and its relentless crackdown on graft have caused many VIPs to avoid casinos in Macau, and analysts predict gaming revenue will decline by $14 billion in 2015.

Dore Entertainment, which operates at a Wynn Macau casino, said last week an employee is suspected of stealing HK$100 million from it. Police said thirty other people have filed complaints that they were cheated out of funds amounting to HK$330 million, excluding the junket’s portion.

Stricter Rules

The healthy operation of junkets is crucial to the Macau’s gaming sector and it’s "necessary to review and improve rules," the city’s Secretary for Economy and Finance Lionel Leong said Tuesday. Macau’s casino regulator said it’s studying new rules following the Dore case, including making junket operators disclose the identity of their directors and collaborators, as well as new requirements such as on capital and shareholdings.

"If tighter junket regulations are adopted, we think the negative initial impact on VIP volumes would be inevitable, driven by the likely accelerating junket room closures," DS Kim, an analyst at JPMorgan Chase & Co., wrote in a note Tuesday. Further downside in Macau stocks should be "fairly limited" however as the VIP segment is no longer a profit driver for the city’s casinos, he added.

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