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Macau junket operator Iao Kun Group’s higher win rate can’t overcome VIP slump

TAGs: iao kun group holding company ltd., junket operators, Macau

iao-kun-group-vip-gaming-turnover-downMacau casino junket operator Iao Kun Group Holding Company (IKG) saw annual revenue fall nearly 45% last year as Macau’s VIP market went into the toilet.

Despite Macau’s much publicized VIP woes, IKG’s rolling chip turnover for the year fell just 2% to $16.6b. But revenue tumbled to $17.2m, down from $31m in 2013. The company recorded a net loss for the year of $60.1m, compared to a net profit of $5.4m in 2013. The loss was largely attributable to $60.9m in contingent consideration related to IKG’s acquisition of the King’s Gaming, Bao Li Gaming and Oriental VIP room operations.

The situation was a little brighter in the three months ending Dec. 31, during which time IKG revenue came to $5.7m, compared to a net loss of $5.5m in Q4 2013. The gains came thanks to a 3.95% win rate, 1.5 points above Q4 2013’s win rate, which helped offset a 34% decline in VIP turnover.

The new year hasn’t been kind to junket operators and IKG hasn’t been spared. VIP turnover in March was down 57% year-on-year, but win rate soared to 4.51%, so the few VIPs that are showing up are the seriously unlucky variety. For the first three months of 2015, IKG turnover is down 54%.

Credit Suisse analyst Kenneth Fong issued a report this week saying junket operators believe Macau’s VIP turnover is showing signs of stabilizing. Fong quoted junket operators saying turnover in March was about on par with figures from January. Fong said that while this “initial sign of sequential stabilization” was encouraging, it was accompanied by “further deceleration of mass market revenue,” and BNP Paribas analyst Shengyong Goh said it would be “a long time before any upside catalyst” appears.

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