Breaking News

Macau casinos face growing bad debts as VIP punters step back

Stock MarketsMay 18, 2016 12:10AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. Visitors from mainland China wait outside a casino in Macau

By Farah Master

Macau (Reuters) - Casinos in Macau face a growing volume of bad debt provisions, further hitting earnings in the world's largest gambling hub at a time when high-roller VIP punters are backing off.

China's slowing economy and a pervasive campaign against graft has sapped demand from wealthy gamblers and prompted operators in the southern Chinese territory to shift their focus to lower spend mom and pop gamblers.

As more and more rich Chinese steer clear of Macau's baccarat tables, revenues from the VIP sector have shrunk to around half of total revenue from over 70 percent at the start of 2014.

The bad debt provisions, which have more than doubled in 2015 and are seen growing further due to tightening regulation, are now adding to the pressure on the industry to adjust.

Macau’s new gaming regulator, Paulo Martins Chan, said the government was auditing junkets, middle men employed by casinos to lure big whale gamblers, to assess the size of their bad debts. Authorities also plan to establish a central credit database to minimize credit risk.

Chan, appointed in November 2015, is due to hold a speech at a Macau Gaming conference on Wednesday, which industry watchers will scour for details on any new regulatory measures.

"This increasing scrutiny and policy tightening, while positive for the segment’s long-term prospects, will likely be detrimental to the shorter-term prospect for the junket operators, VIP revenue, and their related activities," said Jamie Soo, analyst at Daiwa Capital Markets in Hong Kong.

"Junkets facing further operating pressures may result in further VIP room closures."

Although annual income is still five times that of Las Vegas, last year revenues in the former Portuguese colony of Macau dropped 34 percent to $29 billion. Average monthly revenues have halved from what they were at the start of 2014 and are set to fall for a 24th consecutive month in May.  

Receivables over 90 days -- amounts owed to the casinos by gamblers or junkets -- for Sands China (HK:1928), MGM China (HK:2282), Wynn Macau (HK:1128), Galaxy Entertainment (HK:0027), SJM Holdings (HK:0880) and Melco Crown (O:MPEL), doubled in 2015 with bad debts growing by 30 percent year on year.

Genting Singapore (SI:GENS), which owns the tropical Sentosa resort in the city-state, said its bad debt provision more than doubled quarter on quarter in the first three months of the year.

While operators like Sands have tried to accelerate the transition to the mass market segment, they are also increasing the proportion of high rollers they lend to directly rather than through junket operators.

Macau’s junkets have been operating in the territory since the 1970s as casino gambling is illegal in mainland China and there is no formal mechanism to recoup debt.

However they have been decimated by the slowdown over the past two years, with many small and mid sized junkets going out of business. Daiwa estimates the junket industry’s total debt could be between HK$30 billion-HK$60 billion ($3.9 billion to $7.7 billion)

Sands China, the Macau unit of U.S. billionaire and prominent republican donor Sheldon Adelson, missed estimates for first-quarter earnings, with Morgan Stanley (NYSE:MS) analysts attributing the negative surprise to a bad debt of $22 million.

($1 = 7.7626 Hong Kong dollars)

Macau casinos face growing bad debts as VIP punters step back

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email