The decline of the junket industry in Macau will not pose a significant risk for casino receivables, said Bernstein in a note on Wednesday.
Over the last few months, it was speculated that ballooning bad debt amongst junkets could spill over to the balance sheets of casino operators, said the brokerage.
“However our analysis of casino receivables suggests that junket operators do not represent significant risk for casino receivable write-downs. Rather, we believe the recent expansion of casino receivables relative to gaming revenues has more to do with the growing proportion of the direct VIP business as a result of a sharper decline in junket VIP.”
According to Bernstein, as Macau’s casino operators appear to be managing the risks “prudently”, and direct VIP remains a more profitable business, the brokerage remains positive on the long-term outlook for the industry.
“We remain positive on the long-term outlook for the Macau casino operators and are not overly concerned about the casinos balance sheets for now, though this could be an area of greater focus should we see significant growth in direct VIP revenues,” said Bernstein.