Smaller junket operators in Macau are at risk of being swallowed up by their larger peers as the market starts to slow slightly. A report by Reuters also reveals that Amax Holdings, one of the larger junket operators, could soon by insolvent as liabilities exceeded assets by HK$9.9 million on June 29.
“This condition indicates the existence of an uncertainty which may cast significant doubt about the group’s ability to continue as a going concern,” a spokesperson for Amax stated.
The company’s model, which relies on profit sharing deals with various casinos, isn’t working as well as first hoped. It has seen them billions of Hong Kong dollars out of pocket thanks to high rollers at Melco Crown’s Altira casino not paying up. It’s this repayment period that is a cause of disagreement between VIPs and junket operators.
“On average, repayment period is around 15 days. Now some gamblers are asking for 2-3 days longer. Only if it is a very special situation will we consider it,” said Kenny Leong, chief executive at junket-giant Asia Entertainment and Resources Ltd (AERL)
They themselves released a disappointing set of results late last week and it’s fuelling the concerns that smaller firms could be those to go under. In total, there are some 200 companies registered as VIP rooms, or junkets, and during tough economic times it gets a trifle tougher to collect debts. It’s this that’s the problem for smaller operators as they’re simply not as experienced at doing so.
“(The larger players) keep your travel documents, passport or ID (identification cards) until you pay them. They essentially hold you in custody. If you don’t pay, they will ask your relatives and friends to come and pay,” Macau-based political analyst Larry So told Reuters.
Neptune Group, the listed arm of one junket operator, and AERL confirmed to Reuters they’re looking at acquiring some of the smaller firms. Hoffman Ma, deputy chairman of Success Universe Group, which has a joint venture with SJM Holdings, confirmed that the “big guys” are the ones that will be dominating.
As for Amax, they will continue to rely on their junket operation at the SJM-owned Greek Mythology casino and just hope that their fortunes improve.