The Chief Financial Officer of MGM China’s parent company, MGM Resorts, has admitted the future of Macau’s junket business is in doubt following the arrest of Suncity Group CEO Alvin Chau and the closure of its VIP Clubs, but doesn’t expect the situation to significantly impact MGM.
Jonathan Halkyard was speaking on Thursday morning (Asia time) at Morgan Stanley’s Virtual Global Consumer & Retail Conference where he was asked for his reaction to the events in Macau over the past week.
“It certainly means that Suncity’s operations, you’ve seen that we’ve suspended those at our properties,” he replied.
“The reality is that while [junkets] represented a fair amount of revenue in the [Macau] market, it did not represent much EBITDA in the market, particularly in recent months.
“I do think it does call into the question the extent of the junket business but MGM’s business has always been more oriented towards the mass VIP business which has much better margins than the junket business.
“I think many would agree that’s where the business has been going for a while so I don’t think it’s a dramatic impact on MGM.”
Of greater concern to MGM is the upcoming re-tendering process for Macau gaming concessions, with the company having submitted its response to proposed changes to the gaming law in September following a public consultation process. The government is due to issue a report on the public consultation by March, although it remains unclear whether it can complete re-tendering by the time the current concessions expire on 26 June 2022. An extension of up to five years is permissible by law if required.
“I was pleased that back in September we got that process started, we provided our input on the different elements the government had asked us to respond on,” Halkyard said.
“We think we’re going to have a pretty rapid review of that. I don’t know if we are going to make it by next June but we think the company is in a very good position for concession re-tendering. We are taking the process very seriously of course but we are optimistic about it.”
Halkyard said the company remained bullish on Macau’s long-term prospects.
“This is a market that has been impaired by the travel restrictions into it and that’s going to last for a while,” he said. “We think it’s going to improve but it’s unknowable at this point how quickly it will improve.
“I don’t think any of that speaks to the long-term opportunity associated with Macau. The demand side associated with Macau, generally speaking, is going to be fine going forward. We’ve got two big businesses there we’re committed to and a great management team, it’s just going to be a tough road for a while.”
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