Junket Operator Says Conditions In Macau Could Worsen, Leading To Junket Room Closures

Macau junket operator Neptune Group has plans to cut back its business in Macau due to 15 months of year-over-year revenue declines in the former Portuguese colony.

Baccarat has historically driven 91 percent of Macau’s gambling dollars, with high rollers accounting for about 50 percent of the city’s gaming revenue these days.

According to a report from Zacks Equity Research, Neptune’s Macau investments have been hit hard in fiscal year 2015. The entire city has been hurt by the Chinese government’s tighter financial regulations. Beijing has also tried to crackdown on what it perceives as corruption within the junket industry at large, but that has been one part of a broader anti-graft corruption campaign.

China’s cooling economy is a third reason why Macau gaming revenues have plummeted compared to previous levels. Despite the challenges Macau faces, $20 billion is being spent on new casinos there, which includes projects from Las Vegas Sands, MGM Resorts and Wynn Resorts.

Wynn recently saw Dore Holdings, a junket operator in its Wynn Macau casino, report a nine-figure theft. While it wasn’t Wynn’s money, it could impact the flow of cash to some high rollers.

Junket operators are businesses that, through investors, help high rollers get access to the funds they want to gamble with. They also collect any debt.

The VIP gambling segment once accounted for 70 percent of Macau gaming revenue.

According to the report, Neptune Group has indicated that there could be junket room closures in Macau as government restrictions over the VIP gambling segment increase.

Fewer junkets means less liquidity for Macau’s gambling industry.

According to Zacks Equity Research, Wynn Resorts’ stock has hit a six-year low, falling 63 percent year-to-date. Share price of Las Vegas Sands, MGM Resorts and Melco Crown have plunged 30 percent, 15.5 percent and 43.5 percent year-to-date, respectively.

Wynn Resorts is also dealing with two lawsuits in Massachusetts over its planned $1.7 billion casino near Boston, which has cast some doubt over the project.

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