Neptune Group says ‘no getting away’ from VIP crisis

The crisis that hit the gaming sector has made the existing VIP junket model in the territory no longer sustainable, says gaming promoter Neptune Group.
In a interim report filed yesterday with the Hong Kong Stock Exchange, the company said that the way for the junket companies to sustain their business is to diversify into financial services, such as money-lending.
‘We face a daunting challenge right now, seeing slumping profits and lacklustre turnover from the existing business model which is no long sustainable’, the interim report reads.
‘The hope is our new business strategy to secure a stable investment return from other assets and money-lending business will provide us with some much needed leeway to weather such a tough moment’, it wrote.
For the first six months of fiscal year 2015/16, which ended in December, the company posted a net loss of HK$257.02 million (US$33.13 million) while in the previous interim report of the year 2014/15 a net profit of HK$130.93 million had been reported.
At the same time, the commission on rolling turnover of the Neptune Group dipped 53 per cent year-on-year, or by HK$150.95 million, to HK$132.96 million from HK$283.91 million. The decline in turnover was steeper than the drop in revenues from VIP baccarat for the same period.
In the second half of 2015 there was a decline of 36.9 per cent year-on-year in terms of VIP baccarat revenues, which sunk to HK$56.87 billion from HK$95.62 billion.
‘None of our VIP junket operators are collectively clear on when their situation is going to evolve as business is sluggish and the overall macro economy feels restive on the surface, tense underneath’, the management discussion chapter of the report said of the current situation.
No getting away from bad situation
Regarding the future of the industry, the company openly admits that the model will have to be changed and that another bad year lies ahead for gaming promoters. The report also mentions the desperation permeating the junkets in the territory.
‘Another similar six to twelve months downturn is on the horizon. The current untenable situation persists more than one year, smacking of desperation among junkets which need to package their bad debts and distressed assets and sell them to third-party financial investors at a big discount, no getting away,’ the management team explained.
There is hope, however, that the new projects to be opened in Cotai will help the market rebound and bring VIP clients back to the territory.
‘We hope these new projects stir up the momentum of the Macau gaming industry and bring back nostalgia remembrance from prosperous days,’ the report reads.
Another point made in the report is the introduction of the new guidelines by DICJ to regulate the VIP sector, which requires gaming promoters to submit monthly accounting reports.
The company considers that the new instructions ‘create a path for better disclosure and more transparency of financial status of each junket operator’, which is seen as ‘instrumental to keeping the gaming industry in healthy development’.