Galaxy’s $6.5b Cotai Phase 3; Amax gets loan; Melco Crown sues deadbeat junkets

TAGs: Amax Holdings, Galaxy Entertainment Group, greek mythology, junkets, Macau, Melco Crown Entertainment

Melco-Crown-sues-deadbeat-junketsIf analysts are to be believed, Macau will end 2012 by recording its second monthly gaming revenue record of the year, flying in the face of concerns over decreasing VIP action and a Beijing crackdown on junket operators. When the final numbers come in, Citigroup expects revenue to be up 17% to MOP 27.5b (US $3.45b). Sterne Agee expects a slightly smaller increase (16%) but that would also be good enough to set a record, while Nomura are playing the contrarians by predicting growth in the 12-15% range.

Macau casino operator Galaxy Entertainment Group Ltd. has informed Bloomberg that the company plans to spend up to $6.5b expanding Phase 3 of its Cotai Strip operation. Galaxy reportedly plans to target middle-class families by devoting 95% of the 10m-square-foot space to retail and entertainment options, including a 10k-seat concert arena, a 2k-seat theater and a shopping mall. It’s also extremely likely that the non-gaming focus is intended to impress Macau’s regulators, who have stated that each new casino currently under construction will be allocated increasingly scarce gaming tables “according to the non-gaming components.” Phase 3 is expected to be fully operational by 2016.

In Macau, there’s no way to understate the importance of maintaining a healthy table count. Jornal Tribuna de Macau reported that the Greek Mythology casino, which operates under an SJM Holdings license, recorded revenues of MOP 65.9m ($8.25m) in November, down nearly 85% over October’s tally. That follows the 91% drop in August, which followed the casino’s ‘decision’ this summer to return the rights to 40 gaming tables to SJM. For the first 11 months of 2012, total revenues at the Greek came to MOP 2.29b, down 64.5% year-on-year.

Junket operator Amax Holdings Ltd., which holds a nearly 25% stake in Greek Mythology, has seen its fortunes swoon along with the Greeks. After reporting a nearly $2m loss in the six months ending September 30, Amax has pledged 800m shares – over 19% of its equity – to a firm called G Capital Ltd. The loan was revealed in Amax’s interim report, which was filed with the Hong Kong Stock Exchange on Monday. Based on Amax’s current share price, Macau Business Daily estimates the loan could be worth around HK$201m (US $25.9m).

Two other VIP gaming promoters are in hot water with casino operator Melco Crown Jogos (Macau). Melco Crown has taken Ng Kim Wah to court over an unpaid debt of MOP 20.5m (US $2.56m), just two months after it brought a suit against Ng and his company Sat Fat Sociedade Unipessoal Ltda over a MOP 40.5m debt. Two years ago, Ng was the subject of an advertisement placed by junket operator Star 888 Ltd., which disavowed responsibility for “several verbal agreements with certain individuals” made by Ng, a former Star 88 employee whose “sudden disappearance” in Dec. 2010 left the company (literally) at a loss.

Macau Business Daily reported that Melco Crown has also filed suit against junket operator To To Promoção de Jogos – Sociedade Unipessoal Ltda over a MOP 29.5m debt. Melco Crown’s H1 2012 financial report revealed the company relied on junkets for 53.8% of its revenue, although that was down from 61.6% the previous year. Through the first six months of 2012, Melco Crown was owed US $411m from junkets, about $100m of which it listed the likelihood of repayment as “doubtful” and a further $37m of the debt was “unsettled” after a 90-day period.


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