Inside Asian Gaming

INSIDE ASIAN GAMING | August 2012 8 But then things can go terribly wrong in Macau even in a booming economy. Just ask A-Max Holdings. Closely linked with Ng Man Sun, whom it lists at times as an “associate,” at times as a “substantial shareholder,”A-Maxwas thehigh- flying company that put Altira (then known as Crown Macau) on the map back in 2007 with a unique strategy. It would operate as a junket “aggregator,” locking up several promoters under a subsidiary that would enjoy exclusive run of the casino’s VIP rooms. In exchange for certain guarantees on rolling chip turnover, Altira’s then-fledgling owner, Melco Crown Entertainment, agreed to pay the subsidiary company, which happened to be controlled by Mr Ng, a premium of 10 basis points over the standard 1.25% casinos normally pay the junkets as commission. With the aid of Melco Crown, Hong Kong-listed A-Max raised HK$2 billion on the public markets, the money was plowed into Altira in the form of rolling chips, and the two were in business. The deal had Street Market Wai’s prints all over it, and it hit Macau’s intensely competitive VIP market like a Molotov cocktail, sparking a rate war that took months to quell and ended only when the other casino concessionaries, as a matter of survival, banded together around 1.25% and prevailed on the government to cap commissions at that rate as a matter of law. It’s worth noting that what might have happened in the old days didn’t. Not a drop of blood was shed. Not that it did A-Max much good. Its business model promptly collapsed. Melco Crown moved on to other partners, which A-Max claimed was a breach of contract. Mr Ng was to sell off the subsidiary, but no takers were found. A-Max is still trying to recoup some HK$1.9 billion in loans to Altira gamblers. The company hasn’t fared much better at Greek Mythology, which has been its principal source of revenue. The casino technically is owned by Hong Kong-listed SJM Holdings, Stanley Ho’s post-monopoly operating company, which gets a cut of the revenue in one of those semi-feudal sorts of arrangements that make Western regulators squirm but suit the business culture of China quite naturally. Jimei’s Grand Lapa operates in a similar fashion. In all there are 20 of these “satellite” casinos in Macau, 14 under the SJM umbrella, six under the other Chinese concessionaire, Galaxy Entertainment Group. A-Max bought an initial 7.4% stake in Greek Mythology in a deal agreed on in 2004 that cost A-Max a reported US$78 million—$5millionmore than theplace cost to build. As part of subsequent agreements that had the effect of solidifying Mr Ng’s hold over its destiny, the company later raised its stake to 49.9%. Big things were in the offing at the time. The casino was going to expand to double its size. An entity called Greek Mythology Entertainment Group, with Ng Man Sun listed as president, announced its intention in 2005 to bid for one of the two Singapore resorts. There was talk of investing in Las Vegas and Atlantic City. Over time, it all dissipated like the morning mist in these semi-tropic parts. A-Max learned to its surprise, or so it claims, that its 49.9% was in fact only 24.8%. There had been further maneuverings that saw Mr Ng transfer shares as repayment on a loan from his business partner, a woman named Chen Mei Huan with whom he’d also had two children. A-Max has attempted to diversify and has moved into lotteries on the mainland. But with more liabilities than assets, and its earnings potential at Greek Mythology slashed by nearly half, it stated its condition in its latest annual report as one leaving “significant doubt about the Group’s ability to continue as a going concern”. Unabashed, Mr Ng has demanded the removal of the company’s nine directors and their replacement by himself, his daughter and three others of his choosing. Last month, he fired off a letter to that effect from his bed at Hospital Conde de São Januário on Guia Hill, where he is recovering from the injuries he suffered in the attack. Observers, meanwhile, are talking about a shakeout within the junket community. “It will more likely be the big guys The commission rate war took months to quell and ended only when the other concessionaries, as a matter of survival, banded together around 1.25% and prevailed on the government to cap commissions at that rate as a matter of law. It’s worth noting that what might have happened in the old days didn’t. Not a drop of blood was shed. Remnant of a bygone era—Greek Mythology