Asia Entertainment & Resources saw its VIP business decline 24% in the first quarter, but the Nasdaq-listed junket operator expects improvement going forward as it expands its presence in Macau’s high-end market through acquisitions and a retooling of the business model.
AERL secured a pending agreement last week to acquire a six-table VIP room at Macau’s Le Royal Arc Casino and with it relationships with some 500 promoters and agents engaged in recruiting high rollers. Located in the L’Arc Macau hotel, the casino operates as an independently promoted “satellite” of Macau gaming concessionaire SJM.
No price was disclosed for the room, the first for AERL in an SJM property. The company operates in rooms at Galaxy Entertainment Group’s Galaxy Macau and StarWorld Hotel & Casino, at Sands China’s Sands Cotai Central and at Melco Crown Entertainment’s City of Dreams. The company also recently acquired two junket operations for US$5.9 million.
“We remain committed to growing our business presence in the Macau VIP gaming market,” said Chairman Lam Man Pou. He added that the company’s shift last year to a revenue model based on a share of the house win in its rooms, as opposed to commissions paid as a percentage of rolling chip turnover, “is allowing us to improve our competitiveness.”
Rolling chip turnover was US$4.08 billion in the first quarter, down 24% versus the same period last year, a decrease the company attributed in part to tighter credit markets. The decline was partially offset by better-than-average hold of 3.29%. Net income, adjusted for the two junket acquisitions, was down 55% to $7 million, or 17 cents per diluted share.
As for the rest of 2013, AERL is optimistic, forecasting rolling chip turnover to improve to $1.5 billion a month for a total of $18 billion for the year, roughly level with 2012, and planning to buy back 4 million shares.
“We have started to experience stabilization in the VIP gaming market, which should have a positive impact on our overall long-term performance,” Mr Lam said.
