Earlier today, Nomura Holdings, a prominent Japanese provider of various financial services, released a special note, in which it was reported that David Group, one of Macau’s top junket operators, is very likely to close its VIP rooms, due to the lower profits that were generated from VIP players last year.
Nomura analysts Harry Curtis, Wendy Liu, and Stella Xing pointed out that the gambling company will most probably shut its VIP rooms in several phases. It will also try to collect all outstanding debts.
A spokesperson for David Group refused to comment on the matter.
The company started its operations back in 2004. At present, it provides a total of 7 rooms for VIP players in Macau. Of these, 2 are based in Wynn Macau, 2 in MGM Macau, one in the gambling venue at Four Seasons Hotel Macao, one in Galaxy Macau, and one in L’Arc Macau Casino.
Last year, the company shut down its VIP rooms in City of Dreams and the Venetian Macao.
According to Nomura’s note, David Group’s share on Macau’s VIP market is between 3% and 5%. This makes the company one of the most profitable junket operators in the administrative region.
The gaming experts commented that if the operator closes its VIP rooms in an orderly manner, junket loan liquidity will not be so severely affected. However, it seems that Nomura needs more information so as to be able to provide more accurate prognosis on the likely effects on the junket operators in the administrative region.
The research house’s analysts pointed out that David Group’s employees were not informed about the potential closure. What is more, they also shared that currently, there is no minimum fund that needs to be deposited so as for players to be able to open accounts for the company’s VIP rooms. In the past, they had to deposit at least HK$100,000 or US$12,897.
As previously reported, Macau’s 2014 gaming revenue dropped 2.6% as compared to the numbers posted a year ago. Furthermore, December was the seventh consecutive month of falling profits.
The downtrend was mainly attributed to the decrease in turnover from VIP players. Yet, mass market was also affected towards the end of the year.
Analysts at Morgan Stanley pointed out that the further extension of credits is affecting the VIP market. According to them, the fact that the Golden Week in October generated lower profits than expected led to a decrease in liquidity that could be offset only by the Chinese New Year. However, it cannot be said for sure whether the celebrations are going to help Macau’s struggling economy.
