Macau Junket Plans to Trim Operations, Casino Stocks Fall

Roughly 284,000 square feet of casino space with 498 is featured by its Macau Operations table slot machines, two hotel towers and others. games and 625 Its Las Vegas Operations features around 186,000 square feet of casino space with 232 table games, 1,849 slot machines, two hotel towers and others.

Neptune Group reportedly incurred huge impairment losses from investments in Macau VIP rooms, amounting to $106.8 million in fiscal 2015.

Given the yuan devaluation, government’s scrutiny of money flows and the possibility of tighter junket regulations, Neptune Group believes that VIP gaming volumes will most likely be affected, thereby leading to increased junket room closures.

Neptune added that if the situation “doesn’t correct itself in coming years”, its continued presence in Macau could not be assured.

Junket operators reduced lending after the reported theft, which prompted others to withdraw deposits from various junkets, according to Deutsche Bank AG. The authorities have less control over the capital flight from these networks and the government is cracking down these networks to prevent money laundering.

Wynn Resorts, Limited (NASDAQ:WYNN) had its target price lowered by Telsey Advisory Group from $63.00 to $54.00 in a research note published on Friday morning, MarketBeat.Com reports. Macau is a key operating region for these companies.

The regulator of Macau casino, Gaming Inspection and Coordination Bureau has declared to review regulations for the junket operators in Macau. Neptune shares were down 4% to four-year low, whereas Wynn Macau Ltd. Galaxy Entertainment and SJM Holdings Ltd fell to a five-year low. “Liquidity could increasingly become a concern that could drive further downside to the VIP story”, he said. Sands China Ltd fell to three-year low.

Grant Govertsen, analyst at Macau-based Union Gaming Securities Asia, said the outlook for the VIP gambling industry was set to worsen.

We would like to remind investors that share price of these casino operators have been falling for more than a year now.

Neptune, which organises trips into Macau for VIP gamblers, warns that “With limited cash on hand and long outstanding unsettled debts at risk of being totally written off, as well as the availability of banking facilities, the group’s liquidity position is extremely vulnerable”. The company’s quarterly revenue was down 26.3% compared to the same quarter previous year.

Overall, Macau’s gambling revenues have fallen for the past 15 months, and in July hovered at five-year lows amid Beijing’s crackdown on corruption. Shares of Wynn Resorts Limited (NASDAQ:WYNN), Las Vegas Sands (NYSE:LVS) and MGM Resorts worldwide (NYSE:MGM) have lost value for the past six months. September’s data is typically weaker in the period before the the October holidays known as Golden Week, which will test whether Macau’s casino downturn is set to continue or whether a recovery may be in sight. With increased monitoring, the revenues for the junket system can get worse.