Lower win rate, Macau woes drag Iao Kun’s Q1 2016 profit down 57%

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

Macau casino junket investor Iao Kun Group Holding Company Ltd (IKGH) is up for a challenging year ahead as it see its profits plunge 57 percent to $17.9 million in the first three months of 2016.

Lower win rate, Macau woes drag Iao Kun’s Q1 2016 profit down 57% In a statement, IKGH reported a net loss of US$3.5 million for the three months ended March 31, compared to a net profit of US$17.1 million in the prior-year period. Stocks of IKGH traded in the red at 3.04 percent during Tuesday’s market closing, following the 2016 first quarter earnings’ announcement.

“The first quarter of 2016 continued to see a challenging environment both globally and with respect to the VIP market in Macau, and as a result, we continue to prudently manage our capital,” said Mr. Lam Man Pou, chairman of IKGH. “While we remain positioned to benefit from any turnaround in the VIP market, we continue to seek additional opportunities in overseas markets to further diversify our revenue streams. We remain committed to expanding our overall presence and generating long-term value for our shareholders.”

The Nasdaq-listed company attributed the lower first quarter profits to several factors, including “lower rolling chip turnover during the quarter, as well as a reduction of players for VIP baccarat, consistent with the overall decline of gaming revenue in Macau.”

For the first five months of 2016, IKGH’s rolling chip turnover was US$1.83 billion (an average of $0.37 billion per month), a decline of 46% compared to US$3.38 billion (an average of $0.68 billion per month) in the same period last year.

The company is maintaining the 2016 rolling chip turnover guidance for its five existing VIP rooms in Macau of between US$3.5 billion and US$4.5 billion.

As a result of lower rolling chip turnover, IKGH pointed out that they incurred reduced commissions to junket agents as well as lesser selling, general, and administrative expenses.

IKGH also blamed the slowdown of the company’s profits to the anemic Chinese economy, the anti-corruption campaign of the Chinese government in Macau, as well as the recent tightening of government policies in the premiere Asian gaming hub, including restrictions on credit card usage.

The casino junket operator also noted that the first quarter results had no fair value changes in contingent consideration liability for the King’s Gaming, Bao Li Gaming and the Oriental VIP Room acquisitions.


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