Jimei International profit falls; Macau VIP market may be worse than official stats

macau-vip-gambling-declineJunket investor Jimei International Entertainment Group reported a sharp fall in H1 profits despite a healthy bump in revenue.

On Wednesday, the Hong Kong-listed Jimei International reported revenue of HKD 132.7m (US $17.1m) in the six months ending June 30. The revenue figure is up 18% year-on-year but H1 profit fell 46% to HKD 28.6m thanks to HKD 32m in extra finance costs.

Jimei International is owned by Jack Lam, whose privately held Jimei Group has junket deals with three Macau casinos and also runs the Jimei Casino under an SJM Holdings license.

The publicly traded Jimei International’s focus is on junket activities outside Macau, and struck three such deals last year. The company has a deal to promote 8-10 tables at Crown Perth in Australia, “not less than six” tables at The Star Casino in Sydney, and “not less than seven” tables at NagaWorld in Phnom Penh, Cambodia.

Other junkets have also been turning their focus away from Macau as the SAR’s VIP gambling market remains firmly mired in the dumps. While Macau may have broken its 26-month revenue losing streak, it wasn’t due to a resurgence of VIP gambling, the true state of which analysts are suggesting is even worse than the official Macau figures let on.

Q2 figures released by Macau’s Gaming Inspection and Coordination Bureau (DICJ) showed VIP revenue falling 15.7% year on year, but Union Gaming Securities claims the actual VIP decline was “in excess of 21%.”

The discrepancy is reportedly due to casino operators reclassifying some so-called ‘premium mass’ tables as VIP due to Macau’s smoking rules, which restricts tableside smoking to VIP rooms. The DICJ thus reports this revenue under the VIP column, despite the lack of appropriate VIP betting minimums or junket relationships.

Union Gaming is sticking with its earlier forecast of a 4% VIP decline for 2016 but concedes that it’s possible the VIP market “could continue to see double digit declines going forward even as the Macau market recovers.”

Union Gaming also suggested that Macau’s ‘big three’ junket operators – SunCity, Neptune and Tak Chun – have increased their stranglehold on the VIP market. If their combined market share was between 45% and 55% a few years ago, Union Gaming believes this has now likely surpassed 80%.

Besides the well-publicized decline in the number of junkets operating in Macau, the cutthroat competition for increasingly scarce VIPs meant junket agents commanded higher commissions, which smaller operators couldn’t hope to match, creating a classic case of the rich getting richer.