Wynn, casino stocks drop after report on theft at junket operator

A report by Daiwa Capital Markets says HK$200 million to HK$2 billion might have been stolen from junket group Dore Holdings, which acts as a middleman for high rollers at Wynn Macau.
A report by Daiwa Capital Markets says HK$200 million to HK$2 billion might have been stolen from junket group Dore Holdings, which acts as a middleman for high rollers at Wynn Macau.PHOTO: BLOOMBERG

LOS ANGELES (Bloomberg) - Shares of Wynn Macau led declines in Macau gaming stocks after an analyst report alleged that a junket group operating out of the company's casino in the city might have lost as much as HK$2 billion (S$365 million) to thievery, adding to concerns over the battered industry.

Wynn Macau, controlled by billionaire Steve Wynn, dropped 3.4 per cent to HK$10.88 after midday in Hong Kong, after its parent Las Vegas-based Wynn Resorts fell 4.6 per cent in New York.

The group gets almost 70 per cent of its revenue from the Macau unit. The amount stolen from Dore Holdings, which acts as a middleman for high rollers, could range from HK$200 million to HK$2 billion, according to a report by Daiwa Capital Markets analysts led by Mr Jamie Soo.

A Dore employee at Wynn casino said by telephone the company would comment later. 

Macau is facing the worst downturn in its history as China's anti-corruption crackdown and the country's slowing economy keep away high rollers, who bring in a majority of casino revenue in the world's biggest gambling market. The alleged theft, if proven true, could crimp liquidity among junkets and accelerate closures of exclusive gambling rooms operated by these middlemen.

"The balance in this instance, even at the low end, is material and quite significant," Mr Soo 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."

The latest development echoes an incident a year ago when more than US$1 billion (S$1.4 billion) was allegedly stolen from another junket operator. That prompted investors to withdraw their money from the industry, reducing the amount junkets could lend to gamblers. The industry has not recovered from this liquidity squeeze, Daiwa said in its note on Thursday (Sept 10).

Junket operators are independent from casinos, supplying high rollers with credit. The casinos provide dealers and chips in private rooms where the junket operators take their clients.

"Dore owes no money to the company and continues to operate in Wynn Macau," Wynn spokesman Michael Weaver said in an e-mail. The concerns over Dore "have no direct financial impact on Wynn Macau", he said.

Mr Grant Govertsen, an analyst at Union Gaming Group, does not expect the incident to have a "measurable negative" impact on Macau, which has seen casino revenue fall for 15 straight months.

"What Macau is facing is not a liquidity problem but a demand problem," he said. "If this was late 2013 then we might want to worry about liquidity being removed from the system that could otherwise fulfil pent-up demand," he said, referring to the boom period of the industry.

The impact of Dore is minimal as the company accounts for about 3 per cent to 4 per cent of junket volumes, said DS Kim, an analyst at JPMorgan Chase.