\nThe gambling junket business model as applied to Macau is broken \u201cfor now\u201d, says a senior industry executive.<\/p>\n
\tRob Goldstein, president and chief operating officer of Las Vegas Sands Corp, parent of Macau casino operator Sands China Ltd, was responding to questions during the Bank of America Merrill Lynch 2015 Gaming and Lodging Conference for investors, held in New York on Wednesday.<\/p>\n
\t\u201cI don\u2019t have a lot of confidence in the VIP [segment in Macau] because I think the junket model \u2013 for now \u2013 is broken,\u201d said Mr Goldstein, who is also interim president and executive director of Sands China.<\/p>\n
\tDeutsche Bank AG said in a note on September 1 that \u201cat least eight\u201d Macau VIP gambling junket rooms had closed in August, but didn\u2019t mention them by name. A trend of junket closures has been seen recently in Macau. Investment analysts have linked it with a dramatic decline in gambling revenue from Chinese customers; particularly in the VIP segment.<\/p>\n
\t\u201cI can\u2019t envision the VIP getting back to the full throttle of a year ago \u2013 and for numerous factors,\u201d stated Mr Goldstein.<\/p>\n
\tHe said they included \u201cthe AML [anti-money-laundering] situation, money movement, economics,\u201d references respectively to Chinese central government policy and to slowing in China\u2019s general economy.<\/p>\n
\tBrokerage Wells Fargo Securities LLC said in a note last week it had heard bearish views expressed about Macau VIP gambling after meetings in Las Vegas with senior executives from casino firms with Macau operations.<\/p>\n
\tBut Mr Goldstein noted during Wednesday\u2019s conference: \u201cCycles come and cycles go. It would be crazy to sit here and write anything off.\u201d<\/p>\n
\tThough he added: \u201cIt\u2019s hard for me to see a catalyst to make VIP get strong again. It resides with consumer confidence and consumers\u2019 ability to earn the cash. That\u2019s going to take a while to rebuild.\u201d<\/p>\n
\tThe Macau government produces official figures on the split between casino gross gaming revenue (GGR) for VIP baccarat \u2013 the game of choice for Chinese high rollers \u2013 and the mass market segment, on a quarterly basis, several weeks after the end of each quarter. The data for the second quarter showed VIP baccarat GGR fell 42.2 percent year-on-year, while mass-market GGR, including slots and electronic table games, fell by 30.2 percent year-on-year.<\/p>\n
\t\u201cThe confidence of that level of consumer at the very high end, I think that is probably <\/p>\n
\tThe executive added: \u201cI don\u2019t think anyone in China \u2013 no matter how rich or poor they may be \u2013 is unaffected by consumer confidence right now.\u201d<\/p>\n
\t\u201cThe stability of the mass segment is critical to us \u2013 premium mass can move down rather quickly,\u201d he noted, referring to a customer segment mainly playing table games for higher stakes but in cash rather than on credit, and normally at lower minimum bets than VIP punters.<\/p>\n
\tDefensive pick<\/p>\n
\tJapanese brokerage Nomura advised in a Tuesday note that investors concentrate on the more \u201cdefensive\u201d Macau names, naming Sands China as an example.<\/p>\n
\tSands China gained 150 basis points of GGR share month-on-month in August, maintaining top spot in the GGR league table, according to industry data compiled by GGRAsia.<\/p>\n
\tMr Goldstein conceded in his Wednesday remarks that there had been an \u201cincredible 12-month cycle of pushback\u201d market-wide in Macau.<\/p>\n
\t\u201cBe it smoking, visas, or UnionPay\u2026 there\u2019s been nothing but bad news coming out of Macau since last summer,\u201d he stated, referring firstly to a tabled bill to ban smoking in Macau casinos that is currently under discussion; secondly to a period of tightening that had been applied to conditions for mainland China citizens using transit visas to get to Macau; and thirdly to reports of increased scrutiny of money movements from the mainland to Macau using the China UnionPay Ltd electronic transfer system.<\/p>\n
\tBut Mr Goldstein said that in the long term he was sure that the Macau and mainland China authorities had as much interest in seeing Macau succeed as do investors.<\/p>\n
\t\u2018I believe the government, once it sees Macau prosper on their terms\u2026 [will] want to see social stability. And our business model, which is predicated on lots of retailing, [as well as] lots of gaming\u2026 will prove to be the best model.\u201d<\/p>\n
\tHe added: \u201cA model built on the very, very high end is more troubling right now.\u201d<\/p>\n
\tMr Goldstein said the firm was sticking to the \u201cfundamentals\u201d and its strength in serving mass-market gamblers, general tourists and convention and concert attendees.<\/p>\n
\tSands China\u2019s adjusted earnings before interest, taxation, depreciation and amortisation for the first six months was just under US$1.1 billion, a decrease of nearly 37 percent on the year-prior period.<\/p>\n
\tMr Goldstein stated on Wednesday: \u201cWe still think our model works today, worked yesterday; it just worked better a year ago.\u201d<\/p>\n
\tHe noted: \u201cWe\u2019re going [as an industry] through a bad cycle; that\u2019s not deniable. No one with common sense can be [anything] but appalled by what happened in the last 12 months.<\/p>\n
\t\u201cMacau has had a tough year but we are still bullish on its future prospects. It remains the best gaming [investment] opportunity in the world today,\u201d added Mr Goldstein.<\/p>\n
\tSands China currently operates three casino resorts on Cotai and one on Macau peninsula, The firm is building a new one on Cotai, the US$2.7-billion The Parisian, featuring a half-scale model of the Eiffel Tower.<\/p>\n
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The gambling junket business model as applied to Macau is broken \u201cfor now\u201d, says a senior industry executive. Rob Goldstein, president and chief operating officer of Las Vegas Sands Corp, parent of Macau casino operator Sands China Ltd, was responding…<\/p>\n","protected":false},"author":36,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[],"class_list":["post-9094","post","type-post","status-publish","format-standard","hentry","category-latest-casino-news"],"_links":{"self":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts\/9094","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/users\/36"}],"replies":[{"embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/comments?post=9094"}],"version-history":[{"count":0,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts\/9094\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/media?parent=9094"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/categories?post=9094"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/tags?post=9094"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}