Receivables on the books of some concessionaires are on the rise. Indicative of more competitive conditions?
There are a number of possible explanations for why net receivables are escalating in Macau. But as the following chart shows, there can be no doubt that they have moved higher, and not just on an absolute basis. Net trade receivables as a percent of VIP volume were up at 12/31/11 on a YoY and semi-annual basis at Wynn Macau and Sands China.
MGM’s receivables have been pretty consistent. Surprisingly, MPEL has shown a fairly consistent decline, even at 12/31/11. Of course, both MGM and MPEL have been aggressive in junket credit for the past 18 months or so but it is encouraging that their receivable levels have not indicated any uptick in recent quarters.
Looking at just Wynn Macau and Sands China – the two mature operators who provide enough disclosure for analysis – one can see the pickup at 12/31/11. On a YoY basis, the average receivables % almost doubled while they were up considerably sequentially.
So what’s going on? There are several explanations:
- More junket credit – We’re pretty sure this is happening with some casinos now advancing up to 3 months of commissions, up from the traditional 30 days. We think MPEL, Galaxy, and MGM have been doing this for awhile but LVS began to offer similar programs to select junkets late in 2011.
- More direct VIP credit
- Lower reserving – WYNN's allowance for doubtful accounts as a % of gross receivables dropped from 41% at YE 2010 to 36% at YE 2011. LVS indicated on their recent earnings call that its reserve against gross casino receivables was 27% at the end of 2011 versus 42% in 2010.