Junkets jockey Sands for bigger cut of VIP take

Operators want more commissions for the high rollers as new casinos open

The gaming junkets that bring high-rolling players to Las Vegas Sands' casino in Macau are pressuring the company to raise the multimillion-dollar commissions it pays them for their services.

In anticipation of increased demand from a string of new casino openings, the main junkets serving the Sands Macau have teamed up to push for an across-the-board commission increase of 0.1 to 0.2 per cent of the casino's VIP chip turnover, according to Richard Lum, a Hong Kong entrepreneur whose firm is working on a partnership deal with a Sands junket.

'The junkets are collectively negotiating with Sands,' Mr Lum said in an interview. His firm Teem Foundation is engineering a $539 million tie-up with Sat Ieng Sociedade Unipessoal, one of Sands' top junkets and responsible for about 40 per cent of VIP turnover at the casino.

Macau accounts for the majority of revenue and profit at Las Vegas Sands and business has soared over the past year on the back of rapid expansion into the enclave's $28 billion high-roller market. Crucial to this success has been the network of independent marketing agents, or junkets, that bring players to the casino, lend money and collect gambling debts.

Sands junkets receive an average commission of about 1.1 per cent of VIP chip turnover, according to Mr Lum. That compares with a traditional base rate of 0.7 per cent in Macau, and equates to about US$40 million based on VIP chip turnover of US$3.7 billion at Sands Macau during the first three months of this year.

In dollar terms, raising the commission to 1.2 or 1.3 per cent would mean an extra quarterly payout to junkets of US$3 million to US$8 million, based on the Sands results for the previous three quarters.

The opening of Wynn Macau in the third quarter by Vegas casino owner Steve Wynn is expected to increase competition in Macau's cut-throat VIP gaming sector. Rival casinos are likely to raise commissions to attract the best junket operators, but not without limits.

Analysts said any increase beyond 1.3 per cent might start eating into the casinos' bottom lines.

'I'm not suggesting a full-blown price war but there is pressure for the commission rate to go up,' said Credit Suisse analyst Gabriel Chan. 'I think the [maximum] is 1.3 per cent.'

Sat Ieng is holding negotiations to conduct junket business at the new Wynn casino, according to Mr Lum. The gaming company is headed by Malaysian Chinese junket operator Phua Wei Seng, who also takes high rollers to gamble at Malaysia's Genting Highlands and Australia's Burswood casino.

In a complex deal still awaiting shareholder approval, Teem would buy a 49 per cent stake in a British Virgin Islands company that receives 0.4 per cent of the rolling turnover generated on the eight gaming tables Sat Ieng controls in the Sands private Shanghai room.

Teem's traditional line of business has been timber, which it buys from Congo and sells mainly to China-based manufacturers for use as wood veneer in furniture making.

'For us, this is a prudent stepping stone into the Macau market,' Mr Lum said.