• Subscribe
  • Magazines
  • About
  • Contact
  • Advertise
Saturday 9 August 2025
  • zh-hant 中文
  • ja 日本語
  • en English
IAG
Advertisement
  • Newsfeed
  • Mag Articles
  • Video
  • Opinion
  • Tags
  • Regional
    • Africa
    • Australia
    • Cambodia
    • China
    • CNMI
    • Europe
    • Hong Kong
    • India
    • Japan
    • Laos
    • Latin America
    • Malaysia
    • Macau
    • Nepal
    • New Zealand
    • North America
    • North Korea
    • Philippines
    • Russia
    • Singapore
    • South Korea
    • Sri Lanka
    • Thailand
    • UAE
    • Vietnam
  • Events
  • Contributors
  • SUBSCRIBE FREE
No Result
View All Result
IAG
  • Newsfeed
  • Mag Articles
  • Video
  • Opinion
  • Tags
  • Regional
    • Africa
    • Australia
    • Cambodia
    • China
    • CNMI
    • Europe
    • Hong Kong
    • India
    • Japan
    • Laos
    • Latin America
    • Malaysia
    • Macau
    • Nepal
    • New Zealand
    • North America
    • North Korea
    • Philippines
    • Russia
    • Singapore
    • South Korea
    • Sri Lanka
    • Thailand
    • UAE
    • Vietnam
  • Events
  • Contributors
  • SUBSCRIBE FREE
No Result
View All Result
IAG
No Result
View All Result

VIP credit risk a micro, not so much macro, issue in Macau

Newsdesk by Newsdesk
Sat 22 Jan 2011 at 09:07
2
SHARES
49
VIEWS
Print Friendly, PDF & Email

Rumours this week that a Macau casino operator may be in the hole for HK$100 million because of liquidity issues faced by a junket over player bad debt is tending to provoke one of two responses in town:

a) concern

b) surprise that it wasn’t more money and more than one junket

Although it is likely a similar scenario has played out at other casinos around town, even a few hundred million HK dollars of uncollectibles would only represent a fraction of one percent of total VIP revenue, and it still premature to presage the re-emergence of a bad debt crisis

Still, with Macau VIP gross revenue growing by 62% year on year in the fourth quarter of 2010 and fierce competition in the segment by casinos and junkets for players via the mechanism of profit share, it’s difficult to see how every dollar of credit issued to players could be copper bottomed.

Similar dynamics—rapid VIP segment growth and fierce competition on commission rates—were in play last time there were significant bad debt issues in the Macau high roller market. That followed the market busting 1.35% rolling chip commission offered by Crown Macau (now Altira) in December 2007 in an attempt to grab a large share of the VIP market quickly.

Without pointing any fingers, it’s interesting to note that some of the same personalities that were involved in that competition war have also been linked with the new one.

JPMorgan told Dow Jones Newswires this week that market concerns about the potential negative impact on Macau, and especially its VIP segment, from credit tightening in the general economy of mainland China are overdone.

That may be right in terms of the feeder system to the Macau high roller market. The lending policies of Chinese retail and merchant banks as dictated by China’s central bank are one thing. But the lending policies of Macau junkets to people who rock up in the territory (claiming they have the liquidity already) are quite another.

The need for junkets to preserve their liquidity and profit margins are certainly powerful market-driven mechanisms for imposing credit discipline. But it only takes one or two casinos with a higher appetite for risk than the average—possibly due to internal pressures linked to stock price or balance sheet issues—and an eager and ambitious junket operator willing to serve that higher risk appetite (in order to get potentially above market average profits), for that market discipline on credit issuance to unravel.  This vicious circle is made potentially more vicious because of the fact that listed casino operators don’t immediately have to justify high risk Macau lending policies to their shareholders because usually they’re not the ones doing the credit issuance. When it goes right, management in the individual property claim the success. When it doesn’t, they blame the junkets.

An important question is would any disorder in the Macau VIP credit market lead to a fall in the growth rate of the sector, or discourage high rollers from visiting Macau? The answer from the time of the previous spike in bad credit in the first half of 2008 is ‘probably not’.

But the last round of credit default did attract the attention of the central government in Beijing, and that in turn may have contributed to the restrictions on inward visas for PRC citizens seen in 2008 and through into early 2009.

While we’re on the subject of VIP profit share, a Macau insider has helpfully pointed out to Asian Gaming Intelligence that there is a significant opportunity cost associated with it.  The clue is in the name of the business model—”profit share”. Junkets (and casinos) pay corporate tax on anything called ‘profit’.

Under the longer-established rolling chip commission model, junkets don’t pay tax on junket losses (including bad debt). Casinos, however, must pay their 39% gaming tax on any gross revenue recorded regardless of whether it’s funded by debt that subsequently goes bad. That’s where any disorder in the VIP market could really hurt the balance sheet.

RelatedPosts

Large-scale events center at Wynn Palace part of US$750 million worth of Macau project investments planned by Wynn through end-2026

Large-scale events center at Wynn Palace part of US$750 million worth of Macau project investments planned by Wynn through end-2026

Fri 8 Aug 2025 at 05:54
Filipino maintenance worker passes away in Wynn Palace work-related accident

Low VIP hold hurts Wynn Macau’s 2Q25 results as operating revenues hit US$883 million

Fri 8 Aug 2025 at 05:17
MGM China lives up to new 50% dividend payout policy as total 1H25 interim dividend payout declared at US$152 million

MGM China lives up to new 50% dividend payout policy as total 1H25 interim dividend payout declared at US$152 million

Fri 8 Aug 2025 at 04:59
MGTO to launch 10-day market in Macau’s NAPE to help area transform ahead of pending satellite casino closures

MGTO to launch 10-day market in Macau’s NAPE to help area transform ahead of pending satellite casino closures

Tue 5 Aug 2025 at 14:59
Load More
Tags: JunketsMacauVIP
Share1Share
Newsdesk

Newsdesk

The IAG Newsdesk team comprises some of the most experienced journalists in the Asian gaming industry. Offering a broad range of expertise, their decades of combined know-how spans multiple countries across a variety of topics.

Current Issue

Editorial – Better late than never

Editorial – Better late than never

by Ben Blaschke
Thu 31 Jul 2025 at 07:13

Inside Asian Gaming has in recent weeks been hearing increasing chatter around a possible move by Vietnamese authorities to introduce...

Angel’s Yasushi Shigeta

Angel’s Yasushi Shigeta

by Ben Blaschke
Thu 31 Jul 2025 at 07:08

Yasushi Shigeta, Chairman and owner of one of the world’s largest gaming industry suppliers, Angel Group, sits down with Inside...

The Magic Number

The Magic Number

by David Bonnet
Thu 31 Jul 2025 at 06:41

In this in-depth deep dive into the evolution of the Asian gaming landscape, David Bonnet argues that many regional jurisdictions...

Rashid Suliman – A road well traveled

Rashid Suliman – A road well traveled

by Ben Blaschke
Thu 31 Jul 2025 at 02:45

Rashid Suliman, Vice President of Global Gaming Asia-Pacific for casino solutions provider TransAct Technologies, provides some insight into his unique...

Evolution Asia
Your browser does not support HTML5 video.
Aristocrat
GLI
Nustar
SABA
Mindslot
Solaire
Hann
Tecnet
HKUST
NWR

Related Posts

IGT to unveil comprehensive game portfolio, new jackpots at Australasian Gaming Expo

IGT to unveil comprehensive game portfolio, new jackpots at Australasian Gaming Expo

by Newsdesk
Fri 8 Aug 2025 at 12:56

IGT will showcase 10 new game families as well as a revamped jackpot strategy for the local ANZ market at the upcoming Australasian Gaming Expo (AGE) taking place at ICC Sydney from 12 to 14 August 2025. This will also...

Large-scale events center at Wynn Palace part of US$750 million worth of Macau project investments planned by Wynn through end-2026

Large-scale events center at Wynn Palace part of US$750 million worth of Macau project investments planned by Wynn through end-2026

by Ben Blaschke
Fri 8 Aug 2025 at 05:54

Wynn Macau Ltd is looking to spend up to US$750 million through the end of 2026 on a series of upgrade and expansion projects at its Macau resorts, including development of a new large-scale events center at Wynn Palace. The...

Filipino maintenance worker passes away in Wynn Palace work-related accident

Low VIP hold hurts Wynn Macau’s 2Q25 results as operating revenues hit US$883 million

by Ben Blaschke
Fri 8 Aug 2025 at 05:17

The Macau operations of Wynn Resorts Ltd generated operating revenues of US$883 million in the three months to 30 June 2025, basically flat with the same period in 2024 due in part to low hold across the board – particularly...

MGM China lives up to new 50% dividend payout policy as total 1H25 interim dividend payout declared at US$152 million

MGM China lives up to new 50% dividend payout policy as total 1H25 interim dividend payout declared at US$152 million

by Ben Blaschke
Fri 8 Aug 2025 at 04:59

MGM China on Thursday declared an interim dividend of HK$0.313 per share for the period ended on 30 June 2025, amounting to a total payout of HK$1.19 billion (US$152 million) and living up to its recently updated dividend policy by...

Your browser does not support the video tag.


IAG

© 2005-2025
Inside Asian Gaming.
All rights reserved.

  • SUBSCRIBE FREE
  • NEWSFEED
  • MAG ARTICLES
  • VIDEO
  • OPINION
  • TAGS
  • REGIONAL
  • EVENTS
  • CONSULTING
  • CONTRIBUTORS
  • MAGAZINES
  • ABOUT
  • CONTACT
  • ADVERTISE

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist

No Result
View All Result
  • Subscribe
  • Newsfeed
  • Mag Articles
  • Video
  • Opinion
  • Tags
  • Regional
  • Events
  • Contributors
  • Magazines
  • Advertise
  • Contact
  • About
  • Home for G2E Asia

© 2005-2025
Inside Asian Gaming.
All rights reserved.

  • English