Gaming-focused brokerage Union Gaming says its long term outlook on Macau’s VIP segment remains negative, forecasting further GGR declines in 2017 even as the mass segment has turned positive.
In a note from the brokerage on Wednesday, Union Gaming analysts say real VIP GGR growth rate was notably worse in 16Q2, at a 21.3 percent decline (vs. +4.4 percent for mass GGR).
“While we expect the declines in VIP to continue to get less worse through the end of the year, we are still forecasting a decline of 4 percent in VIP GGR for the whole of 2017 and are biased to the downside,” said the brokerage.
Furthermore, the junket industry is headed for even more consolidation, with the brokerage noting that the smaller, undercapitalized junkets have already disappeared, leading to the “Big 3” – which includes Suncity, Neptune/Guangdong, and Tak Chun.
“Today, we think the Big 3 share is in excess of 80 percent and is headed higher.”
On Wednesday, Neptune Group announced Hao Cai, which operates a VIP lounge in Venetian Macau will “cease its gaming promotion business in Macau in the near future.” However, it did not give an explanation of why the company decided to end its operations.
“On a go-forward basis, all junket roads in Macau will go through these Big 3. Not coincidentally, the only junkets at Wynn Palace are the Big 3 and we think the same lineup will be seen at Parisian. On a longer-term basis, the junket oligopoly could give them some leverage to extract concessions from the Big 6 operators, although we think a more likely result will be 1) squeezing more economics from agents, and 2) making it easier to take players to venues outside of Macau with less risk of them jumping ship to another junket,” said the brokerage.
Union Gaming also said the agency to principal model that junkets have begun to adopt will continue moving forward.
“Suncity is embarking on a large-scale IR project in central Vietnam and listed junket operator IKGH is acquiring the Jeju Sun casino in Korea. This dynamic continues to represent a real and significant risk to Macau’s VIP story over the near, medium and longer-terms.”
Markets that will benefit from this dynamic include Cambodia, Laos, Korea, Philippines, Saipan, Vietnam and Vladivostok, noted analysts.