Star Entertainment Casino CEO Gets Spooked By China Arrests

casino-gambling-macauStar Entertainment is Australia’s second largest casino company. Matt Bekier, CEO of Star Entertainment Group, regularly attends scheduled quarterly venture partner meetings in Macau with Hong Kong-based investors Chow Tai Fook and Far East Consortium. But as reported on recently, Chinese officials detained 18 representatives of Australian casino operator Crown Resorts for promoting casino gambling to Chinese VIP’s. China had warned Crown and other casino operators to cease gambling marketing in China as part of their campaign to eliminate foreign casino activities.

It seemed as though the arrests were enough to cause Bekier to cancel his travel planes to Macau. A company spokesman for Star did not offer an official reason for the cancellation.

Star Entertainment does maintain a marketing staff of twelve employees in Macau, consisting of primarily Chinese citizens, as did Crown Resorts. But the direct marketing of gambling activities to Chinese nationals is illegal on the mainland, as is organizing more than ten people to visit overseas casinos. However, gaming companies can promote the tourism aspects of their resorts. Star had recently increased their promotional activities on the Chinese mainland.

Casino gambling in China is legal only in Macau, and while Macau has a degree of autonomy under the “one country two system” principle, it is ultimately controlled by Beijing.

Not only is CEO Bekier nervous about the whole situation, but investors are as well, as stocks are being sold down amid concern Chinese high rollers will be reluctant to visit Australia . There is fear that the arrests could have implications for Star’s Australian gaming licenses, which, of course, would affect share price. Already, Star shares have fallen eleven percent while Crown shares have suffered a sixteen percent decline.

Philip Bayley, credit analyst for ADCM Services, said, “The declines show that fixed-income investors are also becoming concerned about the longer-term implications of the Chinese arrests. There is the obvious revenue impact if the Chinese VIP business is lost, but Chinese convictions for Crown employees may also have implications for Crown’s Australian gaming licenses.” Bayley noted that Crown had a multi-billion dollar expansion strategy for the Barangaroo project in Sydney, Australia that would be heavily dependent upon a constant flow of Chinese high rollers. Should that pipeline of VIP gamblers dry up, the Barangaroo expansion would be at risk.

In an effort to downplay the financial impact that the arrests of the Crown employees would have on the share price, Crown pointed out that out of total revenue, only twelve percent was generated by high rolling Chinese gamblers from the mainland. Rohan Sundram, analyst for Citi, that Crown will make up the deficit by tapping into other markets in India, Hong Kong and Southeast Asia.

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