Chips are down as high rollers lay low, by Vanda Carson - The Sydney Morning Herald - 10th November 2008

The management of James Packer's Macau joint venture will face tough questions about a sharp fall in the number of VIPs at baccarat tables when it announces its third-quarter results late on Thursday night.

Shares in Melco Crown, which trades on the Nasdaq in the US, have been on a rollercoaster ride in recent weeks due to fears that it will be hit by a debt crisis that has afflicted the US gambling giant Las Vegas Sands.

Las Vegas Sands said it risked defaulting on its loans, and even bankruptcy, if its earnings from its Las Vegas casinos did not improve. The company, which is behind the Venetian casino in Macau, pulled its plans to raise $US5.25 billion ($7.5 billion) in loans to fund its expansion.

Investors in Melco Crown are also concerned the Macau market is heading for a fall in gamblers due to Chinese visa restrictions.

They have also been under pressure as casino revenues have dropped because the operators of group gambling tours, known as junkets, who lend gambling money to casino visitors, have found it hard to get credit from banks due to tighter lending standards. Melco Crown has a deal with the junket operator Amax Entertainment to provide visitors to its Crown Macau casino, which focuses on VIP gamblers.

Shares in Melco Crown have fallen more than 83 per cent since their peak of $US22 nearly two years ago, closing at $US3.83 on Friday. James Packer's Crown Limited owns 37 per cent of Melco Crown.

In the September quarter, VIP revenue in all Macau casinos fell 14 per cent from the previous quarter, to 17.25 billion patacas ($3 billion), according to the latest statistics. VIP revenue once made up almost 70 per cent of the Macau market, but it has now slipped to just over 66 per cent.

A Hong Kong-based gambling analyst, Gabriel Chan, of Credit Suisse, said the lack of finance available to gamblers was hurting casino revenues in Macau.

"People are losing money in the stockmarket so that would affect appetite for gambling," Mr Chan said. "The VIPs depend on the junket operators to offer them credits, but right now not even the junket operators can get financing."



Media Man Australia Profiles

James Packer

Casino News