Iao Kun Group posts Q3 loss, eyes acquisitions of smaller junkets


iao-kun-group-jmacau-unket-acquisitionMacau casino gaming promoter Iao Kun Group Holdings (IKGH) plans to acquire some smaller junket operators who might not survive Macau’s current revenue decline. Junket operators have found themselves under unprecedented pressure in 2014 following Beijing’s crackdown on corruption, tightening credit markets, gamblers either unable or unwilling to pay their markers and the occasional billion or so being flat out stolen from junket investors.

Sterne Agee analysts said IKGH has told investors it smells opportunity in the financial struggles of Macau’s lesser-known junkets and believes it can snap up market share on the cheap. IKGH currently has ties to five VIP gaming rooms in Macau but is looking to expand its reach into other Asian gaming jurisdictions, including the Philippines, South Korea and Vietnam.

IKGH reported a loss of $12m in its third quarter earnings report as gaming revenue dropped 15% to $51.9m. The company says its 2.53% quarterly win rate was below the statistical norm of 2.7% to 3% and the company also booked a $7m loss on a change in fair value from the acquisition of three Macau VIP gaming rooms.

On the bright side, VIP rolling chip volume rose 5% to $4.3b in Q3, a significant feat compared to the 19% VIP turnover experienced by the overall Macau market during the same period. For the year to date, IKGH’s rolling chip volume is up 9% to $13.8b. Rolling chip volume fell 30% in November but win rate soared to 3.66%, well above the statistical norm. Looking ahead, IKGH has reduced its guidance for full-year rolling chip turnover from a range of $17b to $19b down to between $16.8b and $17.5b.