Foreign-only games in Vietnam aren't the best environment for billions of dollars in casino investments, but recently announced plans involving Macau's Junket investor SunCity Group "have an opportunity," says broker Union Gaming Securities Asia Ltd
"There will be no better local partner than Vina Capital. In a market like Vietnam, it is important to have a strong and well-connected local partner. This could help to win approval, especially for local gambling (eventually)," Union Gaming analyst Grant Gobersen said in a note Wednesday. He mentioned Vina Capital Group, a major investment management and real estate development company in Vietnam.
His comments came in an update to a $4 billion Vietnam casino project that also reportedly involved Macau-based Junket investor SunCity Group and Hong Kong-based Chow Tai Fook Enterprises Ltd.
According to local media, the partners will soon begin construction of a planned casino resort near Hoi An, Quang Nam Province, Vietnam, on the central coast.
Chow Tai Fook acquired a controlling stake in casino resort plans in September 2015. The seller was Vina Capital Group, which was nevertheless linked to the project.
This is not the first casino project promoted by Cha Woo-tae Phuk. The company is also involved in developing a casino resort in Brisbane, the capital of the Australian state of Queensland.
Union Gaming said on the specifics of its Vietnam plan: "We don't like Vietnam's foreign-only concept, but in due course, I think the Hoi An project has potential based on Phase 1 costs."
The first phase of the project will cost US$500 million and will be completed in the first quarter of 2019, local media reported.
"We expect to be 'bought' by home sales to reach future steps, that is, the minimum investment requirement of $4 billion," the broker said
Mr Govtsen said. "Given that Sun City is Macau's #1 volume junket, Chautai Phuk and Sun City have access to the world's deepest pool of gamblers."
Chow Tai Fook is a privately owned conglomerate managed by the family of Hong Kong businessman Cheng Yu Tung. Mr Cheng is a longtime business partner at Stanley Ho Hung Sun, founder of Macau casino investor SJM Holdings Ltd.
Commenting on the location of the proposed scheme, Mr Govtsen added. "The adjacent resort cities of Da Nang and Hoi An are playgrounds for the rich in Vietnam, and are a significant portion of resort property development held mainly by the Vietnamese. As a preferred holiday destination, with easy access by air and air, potential 'local licenses' in the future will make up a significant portion of the nation's high-end games."
Macao's competitors
However, the brokerage noted that new casino projects in the Asia-Pacific region, including Macau VIP junket investors or targeting Asian VIP players, "does not make Macau's VIP story more rosy."
One of the new projects already in operation is Imperial Pacific International Holdings, which is headquartered in Saipan, the U.S. Federal District of the Northern Mariana Islands. Union Gaming said it could pay the equivalent of 200 basis points of casino gross gaming revenue (GGR) in Macau, based on an unaudited Q1 rolling chip turnover of $6.1 billion.
"As recently seen in Saipan, Imperial Pacific generated a rolling chip volume of $6.1 billion in the first quarter of 2016, which is further north than many casinos in Macau are creating today," Govsen said.
Mr Govtsen added: "It is becoming clear that some Asian casinos are scratching the VIP story in Macau. Assuming Imperial Pacific's current execution speed and volume represent a completely separate regeneration from Macau, this alone will negatively impact Macau's GGR [total game revenue] growth this year by almost 200 basis points."
Imperial Pacific announced in October that it was terminating its loan and revenue transfer agreement with Macau casino Junkit Hang Seng, also known as Heng Seng Group or Heng Seng Group. "The downturn in the Macau gaming business is expected to continue," Imperial Pacific said in connection with the move.
A local newspaper reported Imperial Pacific last week received approval from Saipan's gaming regulator, Commonwealth Casino Commission, to raise the percentage of rebates available under its Rolling Chip program from 1.3% to 1.8%.
According to Imperial Pacific, "Since November 2015, about 200 top-tier high rollers have visited temporary casinos in Saipan, many of which have become return customers."
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