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Gaming guru: James Packer move unrelated to Macau market

Gaming expert David Green believes James Packer’s reduced investment in Macau was a strategic move unconnected to the market situation.

Crown Resorts Ltd.’s (Crown) decision to reduce its stake in Melco Crown Entertainment (MCE) from 34 per cent to 27.4 per cent by its Executive Chairman James Packer (pictured) was a strategic move and not because of Macau’s market situation, gaming expert and advisor on gaming regulation David Green told Business Daily.
“I think [James Packer] is looking to build a number of properties and I think as a means of finance he’s prepared to reduce his stake in Macau in order to throw up some capital,” said Green from Macau-based consulting firm Newpage.
Crown Asia Investment Pty. Ltd., a wholly-owned subsidiary of Crown Resorts Ltd., which James Packer owns, sold an US$800 million (MOP6.39 billion) stake back to MCE, reacquiring 155 million shares for US$5.17 per share, with Packer resigning as co-chairman of MCE to become the company’s deputy chairman, Business Daily recently reported.
Green believes the decision by Packer could be a way of reducing Crown’s net debt position and monetising some of his investment with good timing for a decent return, while also arguing it could be a method to get capital for a “speculated privatisation” of Crown.
“If he’s going to do that, then, and he has assets he can readily liquidate without destroying confidence in him then this is an opportunity to do it,” Mr. Green told Business Daily.
“I think that’s what influenced him to buy out; the question is why now when they lost a lot of value. He probably needs the money now, but I don’t think it has anything to do with losing confidence in the Macau market. He has just taken some money off the table,” the gaming expert added.
Mr. Green stated how with US$25 billion a year, Macau’s gross gaming revenue is still two and a half times larger than Nevada’s gross gaming revenue and the world’s largest gaming market, something Packer is aware of, and the reason why Crown’s Executive Chairman still keeps a presence in the territory.

No way like the mass market way
Mr. Green, who was part of the team hired by the Macau Government in 2000 to advise them on the liberalisation of the Macau casino industry, states the realignment from VIP market to mass market has been considerable but it will end up being positive for the MSAR gaming market.
“It’s a realignment from VIP to non-gaming and more mass gaming, and the process is really well advanced. When Packer entered Macau in 2004, VIP was around 74 per cent of gaming revenue and now we’re back to less than half. The good news is that the mass market is eventually the most profitable part of the casinos, in terms of marginal mass market earning more than VIP, there’s no question about it,” the gaming expert said.
Mr. Green mentioned the advantages of the mass market to be the lack of commissions, the absence of credit risk and of the necessity to attract players with benefits and facilities.
“It’s a very profitable sector of the market and I don’t think in the long run the operators will be back to VIP. Although Nevada operators might win a bit more in mass market than Macau operators, the Macau gaming market is still very healthy,” he told Business Daily.
The gaming expert also sees the government announcements of diversification as welcomed but thinks the Five-Year Development plan should be more specific regarding the sectors Macau excels in.
“The government announcements want to force diversification, but diversification into what? And with what resources? To say to the existing operators to just change course to non-gaming is not going to happen.”