News of the arrest on Friday of Alvin Chau, chairman and founder of the SunCity Group, is not directly linked to the US gambling sector, but could have an impact on US groups that have major interests in Macau such as Las Vegas Sands, MGM China or Wynn Macau.
The arrest is another setback for Macau at a time when its future as the leading global gambling hub is being undermined by the actions of the Chinese authorities. The arrest warrant was issued by Wenzhou People’s Procuratorate in Zhejiang and the Balenciaga sneaker-wearing Chau was later detained by the Macau police along with 11 others. The Macau authorities subsequently held a press conference displaying prominently the equivalent of over $385,000 in currency for the cameras.
Setting Sun
The Macau police have accused Chau of arranging for Chinese nationals to gamble overseas illegally, thought to be in gaming facilities in Cambodia and the Philippines. Central to the case would appear to be a system of proxy betting whereby a casino customer gives bet placement instructions remotely to a person present at a live-dealer table in a casino. Proxy gambling is not permitted in Macau.
Border worries
Most worrying for the sector is the possibility, as noted by analysts at JP Morgan, that all junket activities might now be considered by the Chinese authorities as now being covered by the laws prohibiting cross-border gambling. Suncity was three years ago the subject of a scathing state-backed report which suggested it had raked in billions of yuan from illegal online gaming and proxy betting.
But the JP Morgan team added that they had already assumed a structural impairment to VIP play given Beijing’s recent heightened scrutiny.
“We’ve modelled VIP only driving 1-4% of operators’ EBITDA in 2023 (or about 2% of sector profit as a whole) so it doesn’t move the needle for our estimates anymore.”
Further reading: A really interesting article from the Financial Times on Macau gaming’s fractious relationship with Beijing.
