Macau Casino Companies Decline on Card-Swipe Crackdown

Macau Casino Companies Decline on Card-Swipe Crackdown

By Vinicy Chan – May 8, 2014

Wynn Macau Ltd. (1928) fell the most in more than two years in Hong Kong trading, leading declines among operators of China’s only legal casinos, amid concern that a crackdown on illegal money transfers will pare demand.

The unit of Wynn Resorts Ltd. slumped 8.5 percent, its biggest decline since October 2011, at the close in Hong Kong trading. MGM China Holdings Ltd. (2282) dropped 8.2 percent, while Galaxy Entertainment Group Ltd. fell 7.6 percent.

China is cracking down on the use of hand-held card-swipers within casino resorts amid concerns that tens of billions of yuan in illicit funds are being taken out of the mainland and into Macau, the South China Morning Post reported today, citing people in the gaming and security business it didn’t identify.

“Investors are now very jittery,” Grant Govertsen, a Macau-based analyst at Union Gaming Group, said by phone today.

Macau may tighten visa rules for visitors from China, investment bank Union Gaming Group said in a May 5 report. Police in the former Portuguese colony said they had made 12 arrests involving pay card fraud cases in February and March this year, according to an e-mailed statement today.

Police said they made six arrests on Feb. 18 when six UnionPay card terminals, account books and HK$700,000 of cash were seized. On March 6, four people were detained as officers found three China UnionPay card terminals, purchase receipts and HK$920,000. Eight days later, two people were arrested as police found four payment terminal devices, 304 bank cards, authentication machines, card consumption receipts, China travel permits and more than HK$3.4 million ($438,000) in cash.

‘Complies Fully’

UnionPay International has implemented risk prevention measures and collaborates closely with authorities to combat overseas money laundering, capital flight and other illegal bank card use, the unit of China UnionPay said in an e-mailed statement. The state-backed debit card company said it also monitors abnormally large transactions, inspects merchants and shares risk intelligence with law enforcement bodies.

Wendy Wong, a spokeswoman at Macau’s gaming regulator, and Daniel Tang, a spokesman at Macau’s Financial Intelligence Office, a government unit that monitors and probes financial crimes, weren’t immediately available for comment.

Conversion Crackdown

Funds obtained illegally through card-swiping come to an estimated $6 billion, or about 12 percent of Macau’s annual mass-market chips purchased, Karen Tang, an analyst at Deutsche Bank AG in Hong Kong, wrote today in a note to clients. A decline of that size would pare earnings before interest, taxes, depreciation and amortization for the six largest casino operators in Macau by 2 percent to 6 percent, with Melco Crown and MGM China affected the worst, she wrote.

Sands China Ltd. dropped 4.6 percent, while SJM Holdings Ltd. (880) declined 6.6 percent. The Hang Seng Index rose 0.4 percent.

Tourists from mainland China can legally bring 20,000 yuan ($3,200) into Macau and withdraw as much as 10,000 yuan a day at cash machines with each card they have.

To skirt the limits, visitors can buy goods at a pawnshop using debit cards such as UnionPay and trade them in for the local currency at the same store. Pawnshops also lend local currency to gamblers.

Visa Crackdown

The use of mobile card-swiping machines to provide visiting gamblers with local currency has caused the pawnbroking business to slump, the South China Morning Post reported, citing industry group the Macau General Chamber of Pawnbrokers. Chou Chin Leong, the chamber’s president, declined to comment when contacted by Bloomberg News today.

Macau may face a visa crackdown as the Secretariat for Security indicated tightening measures could be introduced during July, Govertsen and Felicity Chiang, Union Gaming analysts, wrote in research note this week.

State-owned China Central Television reported over the weekend that Macau visitors who didn’t travel on to a third-party country could receive a special stamp on their passport, which could make future visa applications more difficult, according to Union Gaming.

“Judging from past experience, it’s often all bark and no bite,” Govertsen said. “The shortening of a visitor’s stay or the stricter use of cash cards won’t necessarily curb the gamblers’ capacity to gamble.”

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

 

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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