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China – Chips down for Iao Kun Group in Macau’s VIP sector

By - 10 May 2016

Revenues for VIP gaming promoter Iao Kun Group Holding Company were down by US$0.32bn, or 36 per cent year-over-year in April as growth in Macau’s VIP sector continued to slump.

Win rate for the month of April 2016 was 3.95 per cent.

For the first four months of 2016, IKGH’s Rolling Chip Turnover was US$1.52bn (an average of $0.38bn per month), down 44 per cent year-over-year, compared to US$2.70bn (an average of $0.68bn per month) for the first four months of 2015.

It promotes five major luxury VIP gaming facilities in Macau, China, the largest gaming market in the world. One VIP gaming room is located at the top-tier 5-star hotel, the StarWorld Hotel & Casino in downtown Macau, and another is located in the luxury 5-star hotel, the Galaxy Macau Resort in Cotai, each of which is operated by Galaxy Casino. Additional VIP gaming rooms are located at the Sands Cotai Central and City of Dreams Macau, both in Cotai, and Le Royal Arc Casino, located in NAPE, Downtown Macau. IKGH recently started trial operations to the Australian casinos (Crown Perth Casino in Perth, Australia and the Crown Melbourne Casino in Melbourne, Australia) to gain a greater understanding of the preferences of its junket agents and VIP players and the logistics of the market.

The company’s VIP rooms are primarily focused on high stakes baccarat. Baccarat accounts for approximately 88 per cent of total Macau casino winnings according to the Macau Gaming Inspection and Coordination Bureau (DICJ). In Macau, two remuneration methods are used to compensate VIP room gaming promoters. On a fixed commission basis, VIP room gaming promoter revenues are based on an agreed percentage of Rolling Chip Turnover. On a win/loss split basis, the VIP room gaming promoter receives an agreed percentage of the win in the VIP gaming room (plus certain incentive allowances), and is required to also bear the same percentage of losses that might be incurred. Compared to the fixed commission basis, the win/loss split basis subjects the VIP room gaming promoter to the risk of losses from the gaming patron’s activity and to greater volatility.

Rolling Chip Turnover is used by casinos to measure the volume of VIP business transacted and represents the aggregate amount of non-negotiable chips players purchased.

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