Macau’s VIP gaming downturn has prompted the early termination of a deal between junket operator Hengsheng Group and casino operator Imperial Pacific International Holdings Ltd.
In January 2014, the Hong Kong-listed Imperial Pacific agreed to pay HKD 400m in convertible notes for a 5% share of the profits of Hengsheng (also known as Hang Seng), which at the time controlled 82 VIP gaming tables in seven rooms at six Macau casinos. Imperial Pacific claimed documents provided by Heng Sheng indicated that the junket had generated a profit of HKD 462m (US $59.6m) in the first 10 months of 2013.
One year later, Imperial Pacific warned that Hengsheng had delivered less than half its minimum guaranteed annual profit of HKD 24m. This week, Imperial Pacific revealed that its share of Hengsheng’s profits over the first half of 2015 was just HKD 6k ($774).
Before you start crying for Imperial Pacific, consider that Hengsheng had deposited HKD 376m with Imperial Pacific as alternative security for its profit guarantee from 2015 to 2029. This cash deposit was non-refundable, and so Imperial Pacific expects to realize a profit of “approximately HKD 221m” from the cancellation of the deal, which it intends to invest in its proposed resort casino on the island of Saipan.
In September, the deputy director of Macau labor group Forefront of Macau Gaming claimed that Hengsheng had been reduced to four VIP rooms in Macau. With Macau’s VIP business in the gutter, Hengsheng has focused its attention elsewhere, including a deal with Donaco International’s Star Vegas casino in Poipet, Cambodia.
SUNCITY BOSS INSISTS ALL IS WELL
Macau’s leading junket operator SunCity Group has also spread its wings beyond Macau, but SunCity boss Alvin Chau Cheok Wa told local broadcaster TDM that this was “not related to the situation in Macau or to isolated incidents” like the recent internal theft scandal at rival junket Dore Entertainment Co Ltd.
Chau said SunCity would continue to invest abroad but Chau also echoed recent claims by Danny Xuha Huang, chairman of rival mega-junket Neptune Group, that Macau’s VIP business wasn’t quite dead yet and that “when the tourism and mass-market rises, [SunCity] will rise relatively.”
Chau made the comments following a meeting between Macau Secretary for Economy and Finance Lionel Leong Vai Tak and the Association of Gaming and Entertainment Promoters of Macau. Following the Dore scandal, Macau’s government announced it would impose new accounting rules on junket operators in a bid to improve transparency and junket operators are trying to determine the precise scope of the government’s oversight intentions.
Kwok Chi Chung, who heads the local junket association, told TDM that junket operators supported the government’s plans but wanted to make sure the new laws are “appropriate for the industry to develop more healthily.” The association is pushing for the creation of a shared industry database of deadbeat gamblers but Leong said such a plan would require amending Macau’s Personal Data Protection Act.
