Mid–tier Macau junkets are seeing an upswing in market share in the VIP gaming segment according to brokerage firm JP Morgan Securities (Asia Pacific) Ltd. Latest government data reveals a 16 percent year-on-year increase in Macau casinos gross gaming revenue (GGR) in April, which many industry analysts have attributed to a jump in VIP gambling.

Analysts at JP Morgan highlighted in a note the recent trend of mid-sized junket outfits gaining a higher share of the market than the three major junkets – Suncity Group, Tak Chun Group and Guangdong Group.

They noted that this was a shift from the consolidation that had been observed in the junket industry during the recent downturn in Macau’s casino industry.

According to the analysts, the growth was primarily due to junkets being able to boost their capital levels after a strong showing during the Chinese New Year and also because of new gaming rooms being opened in recent months. Analysts DS Kim and Sean Zhuang however warned that there was increased credit risk because the smaller junket had looser credit policies than the bigger firms.

Analysts from another brokerage firm Sanford C. Bernstein Ltd expect the VIP segment to decline in the second half of the year, which increases the risk of bad debts. In a statement, Vitaly Umansky, Zhen Gong and Yang Xie analysts at Sanford C. Bernstein said,

VIP GGR during the month was much stronger than we had expected. However, longer run we remain skeptical of a long-sustained double digit growth environment for VIP. We see VIP slowing down in the second half (and perhaps turning negative in the fourth quarter).

Christopher Jones of Buckingham Research Group Inc. expects VIP gaming growth to persist short term. He noted that operators were reacting to stronger VIP gaming performance with increased capacity for high rollers. He has forecasted May casino GGR to jump by 13 percent to 15 percent year-on-year.

An analyst with Wells Fargo Securities LLC Cameron McKnight has cited China’s current monetary stimulus program and the return of the housing bubble as the reasons for the improvement in VIP performance. He added that he doesn’t expect these factors to sustain.

The firm expects May casino GGR to be up by 14 percent to 18 percent on year-on year basis.

Grant Govertsen of Union Gaming Securities Asia Ltd noted that the Macau GGR growth was better than expected for the third consecutive month in April.

Categories: Casino News

Posted on: 5th May 2017 by: Gary Beachley