High rollers are pulling the James Packer-backed Crown Resorts Ltd. and rival casino operator The Star Entertainment Group out of the doldrums as they return to Australia to gamble.
Crown Resorts had felt the pinch of the VIP exodus after 19 of its employees, including head of VIP operations Jason O’Connor, were detained in China for “gambling crimes.” The Star was also hit by the VIP slump that plagued Crown.
But the good times are starting to roll again, according to a report in The Australian, as significant numbers of high rollers are returning to both gaming operators.
Part of the reason for the VIP comeback is the resolution of Crown case in China. In August, O’connor was released from a Shanghai prison after serving a 10-month sentence for promoting gambling.
Monique Rooney, equity analyst from Morgan Stanley, noted that VIP volumes had improved after O’Connor’s release, prompting analysts to revise their earlier outlook for domestic casinos to positive.
She noted that the VIP business will continue to see better days in the first quarter of 2018.
“Specifically, junket operators spoke to a material improvement across both Crown’s Melbourne and The Star’s Sydney properties in recent months versus the VIP volume lows seen in 2017,” she said in a client note. “Since the Crown detentions in October 2016, Australia’s share of the VIP market has halved from 6 per cent to 3 per cent as at 30 June 2017,” she said.
Morgan Stanley made a forecast that 2017 represents rock bottom for the Australian VIP segment and business will pick up by 2018. It upgraded its VIP expectations for Crown, and to a lesser extent The Star.
From a six percent fall, Morgan Stanley now is expecting Crown’s VIP business to increase 9.4 per cent in 2018.
“With the market focusing on the weak domestic environment and not factoring much in the way of a recovery for VIP in 2018, we believe any rebound in growth would be taken positively,” Rooney said.
