Macau to limit commissions paid for bringing in high rollers

Macau, the world’s biggest gambling hub, will limit the commissions paid to junket operators to 1.25 percent of the betting chips purchased by high rollers, helping cut casino operators’ costs.

Las Vegas Sands Corp., SJM Holdings Ltd. and the four other operators in the only Chinese city where casinos are legal have until Oct. 1 to alter agreements with companies catering to so- called VIP gamblers. The cap will apply to future and current commissions, Francis Tam, Macau’s secretary for economics and finance, said in the government gazette yesterday.

Macau’s six casino operators, including Melco Crown Entertainment Ltd. and Galaxy Entertainment Group Ltd., lobbied the government to limit the commissions. The casinos pay the agencies a percentage of the amount high rollers spend using non-negotiable chips, which they can’t convert back into cash.

“We expect commission cap at 1.25 percent could boost VIP casino operators earnings before interest, taxes, depreciation and amortization by 5 percent to 27 percent,” Morgan Stanley analysts Praveen K Choudhary and Corey Chan said in a note to clients today.

SJM rose 6.4 percent to HK$4.81 in Hong Kong trading today, boosting its 2009 advance to 185 percent. Galaxy, controlled by tycoon Lui Che-woo, rose 0.5 percent to HK$3.81 and has more than tripled in market value this year.