Gaming promoter, Neptune Group, says that the crisis that has hit the gaming sector hard has rendered the territory’s existing VIP junket model no longer sustainable.

The company said in an interim report filed with the Hong Kong Stock Exchange yesterday, that diversifying into financial services, such as money-lending, is the way to go in order for junket companies to sustain their business. The interim report reads, “We face a daunting challenge right now, seeing slumping profits and lacklustre turnover from the existing business model which is no long sustainable,” according to Macau Business Daily.

Neptune posted a net loss of HK$257.02 million (US$33.13 million) for the first six months of fiscal year 2015/2016; the fiscal year ended in December. The previous year’s interim report for 2014/2015 reported a net profit of HK$130.93. At the same time, the Neptune Group’s commission on rolling turnover fell 53 percent year-on-year, or by HK$150.95 million, from HK$283.91 million to HK$132.96 million. For the same time period, the turnover decline was more severe than the decrease in revenues from VIP baccarat. In terms of VIP baccarat revenues, there was a decline of 36.9 percent year-on-year in the second half of 2015, sinking to HK$56.87 billion from HK$95.62 billion.

Regarding the company’s future, Neptune openly admits that another bad year is on the horizon for gaming promoters and that the junket model will have to be changed. Also mentioned in the report is the desperation spreading throughout the territory’s junkets. The management team explained, “Another similar six to twelve months downturn is on the horizon. The current untenable situation persists more than one year, smacking of desperation among junkets which need to package their bad debts and distressed assets and sell them to third-party financial investors at a big discount, no getting away.”

There is hope by junket operators, however, that a market rebound will be aided by the new projects opening in Cotai and those VIP clients will return to the territory. Also mentioned in the report, is the Gaming Inspection and Coordination Bureau’s (DICJ) introduction of new guidelines to regulate the VIP sector. Those guidelines require that promoters submit monthly accounting reports. According to Neptune, the new guidelines “create a path for better disclosure and more transparency of financial status of each junket operator.”

Back in September, the Neptune Group, which once had a thriving operation in Macau, said it was finding it difficult to post consistent profits after the anti-corruption crackdown, and announced that it was considering shutting down its Macau operation and concentrating on other business interests. The Neptune Group has partnerships to operate VIP rooms with the Sands Macao, the Grand Lisboa and the Venetian Macao .  When compared to the same period last year, Neptune had an overall loss of 33% in 2015.

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