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VIP revenue impact will be felt by all operators: CLSA

Brokerage CLSA says it expects to see a fall in Chinese VIP in Australia’s market in the 12 months following the arrests of 18 Crown Resorts staff in China.

In a note on Thursday, the brokerage presented several scenarios of how Australia’s VIP market may play out following the arrests.

“The charges (if any) are unclear but the event is likely to impact VIP revenues for all operators,” said CLSA.

“Less clear is the impact on mass revenues, future projects and other markets (Macau).”

Most likely, Australia’s VIP market would play out in a similar way to that of South Korea after China’s crackdown on VIP promotion last year, said the brokerage.

“[Our base case is] 35 percent VIP revenue declines for Star [Entertainment] and SkyCity in FY17 consistent with the Paradise Leisure experience, and 50 percent decline for Crown given its direct involvement in this event.”

This would equate to a 17 / 27 / 18 percent decline in VIP revenues for Crown / Star / SkyCity respectively, said the analysts.

It also notes that Star Entertainment has the greatest exposure of Chinese VIP players, while SkyCity is likely to see less impact.

“Crown’s exposure potentially extends to its holding in Melco Crown, and the value of future projects skewed to VIP, namely Crown Sydney,” added the brokerage.

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