Junket promoter Asia Entertainment & Resources Limited has reported a 9% drop in profits for 2012 as a result of declines in rolling chip turnover in the company’s four VIP gaming rooms in Macau.
Adjusted for non-cash charges related to the acquisition of two junkets, net income came in at US$70.1 million, or $1.66 per diluted share, versus $77.3 million ($2 per share) in 2011. On a non-GAAP basis, backing out the charges, net income was $61.6 million, or $1.46 per share.
The decrease “was due primarily to lower revenue generated from decreased rolling chip turnover as a result of the economic slowdown in parts of mainland China,” the company said. “In order to control credit exposure, the amounts of markers made available to junket agents were reduced, negatively impacting the growth in rolling chip turnover.”
A lower-than-average win rate for November and December also factored into the decrease, AERL said.
In September, Nasdaq-listed AERL went from a fixed-commission business model to revenue-sharing with the casinos, which increases earnings volatility.
“Despite the lower year-over-year results we believe we managed our business appropriately to reduce exposure to undue risk that can impair longer-term growth,” said AERL Chairman Lam Man Pou. “The tightening of credit to junket agents had a near-term impact on our overall performance that we expect will reverse as a result of improvement in the Chinese economy.”
For the first two months of 2013, AERL’s Rolling Chip Turnover was US$2.55 billion (an average of $1.28 billion per month), down 29% year-over-year, compared to US$3.62 billion (an average of $1.81 billion per month) for the first two months of 2012. Win rate for the first two months of 2013 was 3.89%.
Looking ahead, the company is providing guidance of US$1.5 billion per month in aggregate RCT, or $18 billion for the year, comparable with 2012, and non-GAAP income guidance of $60 million to $75 million, not taking into consideration possible future expansion or additional VIP gaming rooms.
“We remain committed to growing our business presence in the Macau VIP gaming market and continuing to create value for our shareholders,” Mr Lam said.
