Inside Asian Gaming

February 2013 | INSIDE ASIAN GAMING 25 In Focus Source: CLSA Asia-Pacific Markets Source: CLSA Asia-Pacific Markets Source: CLSA Asia-Pacific Markets Macau Junket Finance Structure I Macau Junket Finance Structure II VIPWin-Rate Calculation Junket operators seldom engage the VIP players directly. Normally, the agents are responsible for liaising with the players and, most importantly, collecting cash from them. To incentivize and remunerate the agents, junket operators often extend credit and share commission with the agents. from time to time, initiate the players to“roll,” their “cash chips” into “non-negotiable” chips for further betting so that they may receive more commissions. The rolling-chip win rate fluctuates between 2.5% to 3.5% (theoretic win rate for baccarat in Macau is 2.85%) and is dependent solely on the luck factor. After each game, VIP players have to exchange their cash chips into non-negotiable chips if they would like to continue, which implies an increasing amount of non-negotiable chips wagered as the player continue to roll, resulting in a range bound win rate. Win-Rate Reporting/Calculation There are instances where the win rates casino operators report constantly exceed the theoretical baccarat rate of 2.85% (only baccarat is played in VIP rooms). We believe this is due to the accounting of the win/hold rate, which includes cash play. Take a casino with US$100 million total VIP rolling volume as an example, since the win rate usually fluctuates around the theoretical win rate of 2.85%, the casino should report VIP revenue of about US$2.85 million. In the case where cash play is involved (assuming cash play is 10% of total VIP volume), the VIP revenue reported will be Theoretical win = Average bet x hours played x decisions per hour x house advantage US$2.85 million. However, the win rate reported, as required by DICJ, is based on rolling-chip volume. Thus, the effective win rate reported would be (US$2.85 million/ US$90 million) = 3.17%. Non-rolling-chip win rate is usually reserved for the mass gamers and is the net win divided by the table drop (amount of chips bought). As cash chips are used for non-rolling-chip games, the same patch of chips are being recycled between the players and the house and no incremental chips are added to the pool as the player bets.