Inside Asian Gaming

41 January 2013 | INSIDE ASIAN GAMING REGIONAL BRIEFS that 16 people—assumed to be problem gamblers—had applied for self-exclusion in November. The new entry laws, and particularly the raising of the minimum age, are unlikely to have a significant negative impact on casino revenues. Around 70% of casino revenue came from VIP gaming last year, and most VIPs are men in their 30s and above. Furthermore, most massmarket players appear to be in their 30s or older—possibly a function of the wage differentials between school leavers and more experienced workers—though there is a more equal balance between the sexes on the mass floor. And while no information was provided on the circumstances of the people applying for self- exclusion, the number is relatively low, and one could assume the people taking this route are often incapable of continuing to gamble large sums, so the self-exclusion provision is also likely to have only a marginal impact. The hike in the entry age is actually designed to address two important social issues—political concerns in Macau and Beijing about the risks of problem gambling among the young, and a general desire to improve the staying on rate in education in Macau, thus moving Macau workers up the value chain. Previously, Macau permanent residents were able to take well paid casino dealer jobs straight from school, meaning they had little incentive to further their qualifications. This is a problem several years down the line when those same dealer recruits find they cannot easily take executive jobs in casino management or outside industries without other academic or vocational qualifications. Early results indicate the designation of 50% of Macau’s casino floors as non-smoking areas from 1st January will also have a muted impact on revenue. Although about 50% of adults in mainland China smoke— compared to 20% in the US—the crucial consideration is that they don’t all do so at the same time. Inside Asian Gaming casually surveyed the main gaming areas of several Macau casinos at peak times prior to the partial smoking ban’s implementation, and found that at any given time, it appeared fewer than one in five players were smoking. This is hardly a rigorous analysis, but suggests that smokers should have little difficulty continuing to indulge their habit, even if smoking is prohibited in a larger proportion of mass areas in order to maintain the majority of VIP rooms as smoking areas. On 1st January, the first day the partial ban became effective, 42 people—some possibly caught unaware by the new regime— were issued on-the-spot fines of 400 patacas (US$50), perhaps in an attempt by authorities to send the message they are serious about enforcing it. Though most analysts predict the partial smoking ban will have only a “limited” impact, Morgan Stanley offered clear guidance, predicting it could push Macau’s gaming revenue growth down 2.8 percentage points “lower than normal.” Morgan Stanley analysts led by Praveen Choudhary wrote last month that the current consensus estimate for revenue growth next year is 11%, but that the partial smoking ban could push growth to a “single-digit” rate. Beijing’s Anti-Corruption Campaign No Threat to Macau The director of the Central People’s Government Liaison Office to Macau, Bai Zhijian, has said that ongoingmeasures against corruption in the mainland and the PRC government’s thoughts on Macau’s casinos are “two different matters,” according to Macau Business Daily . This was in response to a recent “rectification” campaign that China’s new Party head, Xi Jinping, proposed as a means to intensify anti-corruption and anti- money laundering efforts. In addition, on the heels of recentmedia reports on the arrests and detentions of individuals associated with certain Macau junkets, Mr Bai also commented that he does not expect Beijing to change any policies regarding Macau (i.e. there is no contemplation of punitive actions). Macau’s Secretary for Economy and Finance Francis Tam also commented recently that he is not aware of any policy change from China regarding Macau’s VIP business. Union Gaming Research Macau’s Grant Goversten offered the following view:“We continue to believe that the central government has not changed its policies towards Macau and there are no punitive actions being taken against Macau or its VIP segment. Individual incidents (like the arrests mentioned above) are likely to be related to the consolidation of power currently underway in Beijing. We believe 2013 will see a resumption of growth in the VIP segment—likely in the mid to high single digits—while the mass market segment continues to roll along with growth in the 25%+ range, driven by continued penetration into China on the heels of numerous infrastructure projects.” Paradise To Buy US Patents From Chairman Electronic gaming systems supplier Paradise Entertainment Ltd announced that a wholly- owned subsidiary of the company will pay a total of HK$740 million (US$95.5 million)—in cash, a promissory note and shares—for a group of US patents held by Paradise’s chairman Jay Chun, reported Macau Business Daily . Currently, Mr Chun controls 10.14% of Paradise. After the deal, which also includes a reorganization of the share capital of the company, Mr Chun will control around 71.12% of Paradise. That will oblige him to make an offer for the remaining shares. The deal involves five US patents already granted and six others pending, related to multi-terminal betting systems. It is part of Paradise’s plan to expand its footprint in the US. Paradise, through its subsidiary LT Game, is known for having what it claims is the only patented multi-terminal system in Macau that combines electronic betting with a live dealer and live baccarat. The company has shown a willingness to use litigation to protect that monopoly, according to MB Daily . Setting things right—Xi Jinping Jay Chun