Macau has been struggling to keep what is left of its VIP business, and has been watching gambling revenues continuously fall for over a year now.
The last thing that casinos in the city needed was for news to come out that might scare away even more of their biggest customers.
But that’s exactly what happened on Thursday.
Daiwa Capital Markets, an investment bank based in Hong Kong, published a report saying that as much as $258 million had been stolen from a junket operator known as Dore Holdings, one of the companies that facilitates arrangements for the high rollers who visit Macau’s casinos from mainland China.
Casino Did Not Lose Any Money Directly From Theft
The junket in question had been operating in conjunction with the Wynn Macau.
And while the casino itself didn’t lose any money as a part of the scheme, the news still sent shares of the casino operator reeling, as investors fear even more damage to the high roller segment that is so important to Macau’s casino economy.
Wealthy VIP clients have already been shying away from Macau over the past year thanks to an anti-corruption drive by the government in Beijing.
Tighter monitoring of the flow of money from mainland China to Macau has cut into the number of high rollers who are traveling to Macau tremendously, leading to year-over-year revenue losses of around 40 percent over the past year.
The reported heist took place in April 2014, just before the anti-corruption campaign began in full force.
The loss of liquidity in the junket market due to the stolen funds may have dried up the market, contributing to the slowdown for Macau casinos.
In the end, the Wynn may ultimately end up on the hook for some of those losses as well.
The total loss to Dore is unknown, and if the junket can’t cover all of the missing funds, Wynn may be stuck with some bad debts that could never be paid.
Junket Closures Have Further Damaged VIP Market
The situation has also caused some level of concern among high rollers, which in turn may have contributed to struggles in the junket industry in recent months.
“Continued junket closures are a real possibility, and as previously highlighted, we have already witnessed an acceleration of junket closures in the past two months,” wrote analysts at Daiwa. “There are at least 11 VIP rooms slated for closure in [August and September 2015] alone, based on our count.”
According to reports, the theft may be the work of a junket cage manager.
However, some analysts believe that the actual amount lost may have been somewhat inflated, pointing to previous cases in which initial reports of losses were overstated.
Even the Daiwa report acknowledges this. The analysts noted that there is plenty of uncertainty in the amount that was stolen, saying it could be as low as HK$200 million ($25.8 million).
Still, if there is a problem with Dore, that could result in a significant issue for the Wynn Macau. According to reports, Dore’s business accounts for somewhere between 10 and 25 percent of the casino’s junket volume.
“The balance in this instance, even at the low end, is material and quite significant,” the Daiwa analysts wrote. “Our on-the-ground checks point to the possibility that other junket operators may share some of Dore’s existing stakeholders which may exacerbate this contagion impact.”
