AERL stops VIP turnover decline; junkets increasingly viewed as mainstream

TAGs: AERL, Amax Holdings, Asia Entertainment & Resources, junket operators, junkets, Macau, vanuatu

aerl-amax-suncity-macau-junketsAfter slowing the year-long decline in its monthly rolling chip turnover in June, Macau VIP gaming room promoter Asia Entertainment & Resources Ltd. (AERL) recorded a 15% rise in turnover in July. Customers at AERL’s five VIP rooms in Macau wagered $1.5b last month, and AERL attributes the increase to the recent addition of the VIP gaming room operations at Le Royal Arc Casino, which boosted AERL’s total Macau table stable to 40 from 34. AERL’s win rate in July was 3%, at the top end of the normalized rate. For the first seven months of 2013, AERL’s turnover totaled $10.04b, down 12% from the same period last year.

Macau’s newfound emphasis on premium mass – which cuts junket operators out of the mix, which cuts out the need for the casinos to share proceeds – recently led Nevada Gaming Control Board chairman A.G. Burnett to claim junkets were on the decline, although he still believes Macau’s VIP rooms are a haven for “Asian organized crime.” Others, like LT Games chairman Jay Chun, claim the organized crime allegation was the “biggest myth” about junkets, which Chun said have gone corporate.

Chun’s view is the one that predominates among Macau’s youth, according to a new academic study by the University of Saint Joseph’s Emilie Tran and Fiona Cheong Weng Lam. Tran said the study, titled In Search or Responsibility: Legalization and Diversification of the Junket System in Macau, revealed that there was “a new perception of junkets as a line of business” among Macau youth, many of whom are leaving school with the expectation of working in the casino industry.

Tran said the old view of junkets as “not very commendable” has shifted as the junkets became more sophisticated. The young junket employees who participated in the study, many of whom work in accounting, marketing and human resources, “don’t feel like they are doing any kind of crime-associated job.” It helps that many of the larger junkets, such as the SunCity Group, have diversified their interests into industries as varied as film production, forex trading and iron ore mining in Indonesia. As SunCity’s interests have grown, so has their workforce, swelling to 1,200 employees from just 30 when it launched its first VIP room at Wynn Macau in 2007.

SunCity’s monthly VIP gaming turnover in Macau averages $17b, a good chunk of the $75b in turnover generated each month by Macau’s biggest junket operators, including Neptune Group, Golden Group, Jimei Group and Dore Holdings. SunCity exec YM Choong told Reuters that as a “young and very energetic” company, SunCity had a need to diversify and that future investments would target the “property, finance and media” sectors. SunCity’s path to diversification is being followed by the other big junkets. Jimei, which also operates casinos in the Philippines, has invested in wealth management and securities. Last month saw Dore complete its acquisition of Yuenqian Investment, giving Dore control of mainland China’s Lido Pawnshop business (although that could be considered a lateral move).

The price of not diversifying is perhaps best exemplified by Amax Holdings, whose 2012 loss of the VIP gaming room operations at the Greek Mythology Casino led to last week’s warning that it wasn’t sure it could carry on operating in its present form. Amax has resorted to looking beyond Macau for new casino operations it could call its own. Following news that it was seeking a 51% stake in a casino in Turkey’s half of Cyprus, Amax announced it’s in negotiations to buy the Grand Hotel and Casino in Vanuatu’s capital Port Vila. The property is currently owned by Australia’s Zagame Corporation Pty Ltd. but Amax is hoping to close the deal by Sept. 30.


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