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WYNN MACAU, LIMITED

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Macau's casinos pin hopes on everyday gamblers after junket shutdowns

12/21/2021 | 01:13am EDT
FILE PHOTO: Logo of Wynn Macau is displayed in Macau

HONG KONG (Reuters) - Macau's casinos face a bleak short-term outlook after shutting most of their lucrative gaming rooms catering to wealthy gamblers and as COVID-19 travel restrictions prevent the shift to mass-market customers that they will depend on in the future.

The former Portuguese colony that is the world's biggest gambling hub in terms of money wagered has long relied on the revenue from the VIP gaming rooms where high-rollers placed massive bets.

But the Chinese government's recent crackdown on the junket business, which arranged the transportation, accommodation and the credit necessary to gamble for wealthy clients, is calling into question the financial outlook for casino operators including Wynn Macau, Sands China and MGM China.

Junket-run gaming rooms inside casinos made up roughly a third of Macau's overall gaming revenues in 2019, according to Alidad Tash, managing director at 2NT8 Limited, a consultancy specializing in international casinos and integrated resorts.

However, that revenue has dried up after the arrest in November of Alvin Chau, the head of Macau's biggest junket operator Suncity, triggered the shutdown of gaming rooms throughout the city's casinos. Chau is charged with setting up an internet platform based in Macau that let bettors in mainland China, where gambling is illegal, place overseas wagers.

Replacing the VIP revenue will depend on the ability of casinos to draw the mass-market gamers that analysts at Bernstein have said are the "secular long-term growth story" for the sector, but that hinges on controlling COVID-19.

"The pace of recovery in late 2021 and 2022 depends on COVID outbreaks, travel restrictions coming down, and the key to recovery is to have mass players coming back to Macau at more normal levels," the analysts said in a note.

"The future remains in mass and premium mass recovery."

Mass refers to mom-and-pop players who play table games, such as baccarat or blackjack, or slot machines. Premium mass includes players who bet large enough amounts that they earn complimentary rooms, food and transportation but do not have their losses discounted nor are they extended credit from the casinos.

Representatives from Wynn Macau, Sands China and MGM China did not respond to requests for comment on their plans to replace VIP revenues when contacted by Reuters.

Since Chau's arrest, shares of Wynn Macau have plunged about 23%, Sands China has fallen about 13% and MGM China have dropped 20%.

Suncity could not be reached for comment.

RESTRICTED ENTRY

China's strict COVID-19 movement restrictions have limited the pool of mainland gamblers that can enter Macau. In the pre-COVID month of October 2019, there were 3.2 million visitors that came into Macau, in October 2021 that plunged to 328,245 visitors.

Visits remain depressed even though quarantine-free travel is allowed for most arrivals from mainland China.

Group visas for players have not been issued since the COVID-19 pandemic and individual visas to Macau have come under greater scrutiny, according to Ben Lee, founder of Macau gaming consultancy IGamiX.

There are also concerns as to how gamblers in Macau will be able to bring funds into the region.

Junkets, besides extending credit to high-rollers, also operated a shadow banking network that helped players skirt China's capital outflow rules that limit taking only the equivalent of $50,000 out of the country in one year.

Premium mass and premium direct players, who wager enough to gain rebates on their losses and received credit from the casinos, also utilized the methods to move funds.

But with junkets closed down, players have lost the most convenient channel to bring money into Macau, said 2NT8's Tash.

(Reporting By Eduardo Baptista; Editing by Anne Marie Roantree and Christian Schmollinger)

By Eduardo Baptista


© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
MGM CHINA HOLDINGS LIMITED -4.68% 3.67 Delayed Quote.-18.60%
SANDS CHINA LTD -7.53% 14 Delayed Quote.-16.63%
SUNCITY GROUP HOLDINGS LIMITED -5.08% 0.056 Delayed Quote.-55.56%
WYNN MACAU, LIMITED -2.78% 4.2 Delayed Quote.-32.18%
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Financials
Sales 2022 12 278 M 1 564 M 1 564 M
Net income 2022 -4 223 M -538 M -538 M
Net Debt 2022 38 070 M 4 850 M 4 850 M
P/E ratio 2022 -4,98x
Yield 2022 0,10%
Capitalization 21 883 M 2 788 M 2 788 M
EV / Sales 2022 4,88x
EV / Sales 2023 2,40x
Nbr of Employees 12 250
Free-Float 28,0%
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Number of Analysts 17
Last Close Price 4,20 HKD
Average target price 7,70 HKD
Spread / Average Target 83,2%
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Craig S. Billings Chief Executive Officer & Executive Director
Ian Michael Coughlan President & Executive Director
Allan Zeman Non-Executive Chairman
Linda Chen Vice Chairman & Chief Operating Officer
Pearse Carruthers Ciarán Chief Operating Officer
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