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Galaxy to announce “jumbo” VIP deal PDF Print E-mail
Saturday, 19 April 2008

by Nigel Huxtable

Galaxy Entertainment Group Limited is on the verge of announcing a deal with a junket umbrella company four months after Crown Casino began its tie-up with AMA Holdings that catapulted it into the VIP market's top spot.
In response to increased competition for high spending gamblers, the company said yesterday that a 100-plus table “Jumbo sized VIP facility” will be launched at its StarWorld casino.
Details about the deal will be released within the next three weeks, including where the new tables will be housed in the casino complex, said David Banks, group chief operating officer during yesterday's annual results press conference in Hong Kong.
“We are going to put a jumbo facility for up to 100 tables which will probably not be added [all] in the first day but certainly up to 100 in a short period of time,” he said.
The move is a direct response to Melco PBL Entertainment (Macau) Limited's deal with junket aggregator AMA International Limited, which began in December last year.
In return for a commission of 1.35 percent of chip sales, higher than standard market rates, AMA provides credit to junket agents which brings high-stakes gamblers to Macau and provides credit for
The availability of extra credit has seen the market share of MPEL's Taipa casino, Crown Macau grow to 21 percent of VIP gaming in February and 18 percent of the entire market.
The move has also brought increased VIP volume into Macau, said Mr Banks.
In the first quarter of the year gross revenue from VIP baccarat increased by 23 percent over the last three months of 2007 to 20.8 billion patacas, some 73 percent than the same period of last year.
The move is forcing operators to increase margins and look at similar credit lending arrangements for junket agents.
Yesterday, deputy chairman Francis Lui suggested StarWorld had increased its commission, however the growth in volume had made up for the loss in margin.
The new junket deal, which Mr Banks confirmed will be with a junket aggregator, will likely offer agents access to credit allowing Galaxy to better maintain its margins.
The new VIP rooms will more than double StarWorld's high-roller tables which now stand at 69 and have progressively increased since the casino opened in October 2006.
Just over a week after joining the company, the new chief financial officer Robert Drake, who joins Galaxy from Harrah's Entertainment in Las Vegas reported that Galaxy recorded a loss of HK$502 million last year.
An almost tripling of revenue during the first full year of StarWorld's operation to HK$13 billion helped bring back the loss from HK$1.53 billion in 2006.
The result also included the amortisation of almost HK$1 billion in intangible assets costs as a result of the “acquisition of the Macau operation”.
The company also managed to grab 18 percent of the market last year, helped by growing VIP play which contributed almost 80 percent of revenue.
An above average win per table per day result was achieved which the company calculated led the market in quarter three of last year. The final quarter saw its share drop just behind the market leader for the majority of the year, Wynn Macau.
During the year Galaxy also increased the number of VIP room promoters operating at StarWorld to 12 from seven.

VIP deal
Details about the identity of the new VIP partner were not provided yesterday.
Last month at the JP Morgan Gaming, Lodging and Restaurants Conference, Richard Lum, chairman of Dore Holdings Limited, a Hong Kong stock exchange listed investor in junket operations said he believed Galaxy was negotiating with a “mega-junket”.
He suggested it was offering a commission of 46 percent of net win in place of the traditional 40 percent.
Mr Lum also said his company, which has contracts with US operated casinos in Macau, would not dismiss the possibility to also “bundle” with a major concession holder, signalling the potential for a new layer of operator across the Macau gaming market.


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