Macau's junket king plans to lure VIPs back to casino tables in Vietnam

Hong Kong

MACAU'S biggest junket operator will open its own resort in Vietnam by year's end, seeking growth elsewhere in Asia as an exodus of big-spending VIPs from the world's gaming epicenter shows no sign of abating.

Suncity Group, a middleman lender for Chinese high rollers, is moving into casino operations with a US$4 billion Vietnam project and is eyeing the Philippines, Cambodia and Japan for its next investment.

The overseas push comes as Suncity expects that its betting volume will drop by 10 per cent to 15 per cent in Macau in the second half of the year, as tensions from the US-China trade war and stricter industry regulations dampen VIP sentiment.

"Our betting volume in Macau fell 20 per cent in the last few months, but the group's total volume fell by only single digits," said Andrew Lo, executive director of the group's listed vehicle Suncity Group Holdings in an interview. "Where is the business going? To the overseas markets."

Suncity's urgency to diversify beyond Macau is the latest indication that a major shift is taking place in the gaming hub and challenging its prospects for growth.

A sluggish Chinese economy and stricter regulations, like a smoking ban in casinos, have been keeping high-end customers away from the baccarat tables.

The emergence of regional gaming spots across Asia are offering an attractive alternative to Chinese high rollers, who increasingly feel more comfortable further away from Beijing.

Casino revenue at the world's largest gaming hub slumped 8.3 per cent in April, the most in almost three years, with the VIP segment sinking 23 per cent from a year earlier.

"The threat is real," said Union Gaming analysts Grant Govertsen and John DeCree. "Clearly there is a growing realisation that Macau VIP play is bleeding to regional markets, with Cambodia and Vietnam being the primary beneficiaries."

While it is typical for high rollers to try out regional resorts and eventually return to Macau, the analysts said "this time is different".

The regional properties have improved in quality, and infrastructural expansion has made them easier to reach, they wrote, noting that junket operators are sending a steady stream of Macau players to these locations.

While Suncity's Mr Lo said that Macau's scale and variety of gaming options cannot be replaced by any other location, he was pessimistic on the territory's near-term outlook.

The company controls about half of the city's market for junkets, which are operations that lend money, collect debts and market casino trips to high-end gamblers.

"Macau stocks have risen by a lot in the first half of the year because the market is expecting a rebound in gaming revenue in the second half," he said. "But so far, I still have not seen any positive signs." BLOOMBERG