Ximihua case | Zhou Zhuohua arrested for betting that the stock market value evaporates 36 billion VIP room revenue may be frustrated

Macau casino tycoon Zhou Zhuohua, known as "washing rice flower", was arrested, and the news broke the gambling stocks.

As of today (29th) noon, the entire sector is "all red", and the total value of the six major gambling stocks has evaporated by about 35.9 billion yuan.

One person was arrested and the entire section suffered, all because Zhou Zhuohua contributed a lot to Macau gambling stocks.

According to the report of Motongfa, the arrest of Zhou Zhuohua will have a major adverse impact on the gaming intermediary and VIP room industry in Macau. It is expected that the VIP room revenue of gaming intermediaries is expected to shrink by 30% to 50% in the next few weeks. It does not rule out that the market interprets the incident as There are signals of wider suppression on the entire gaming industry.

Some analysts also pointed out that the casino gambling sector has been weak since March this year. Under the haze of cracking down on capital-traveling and the possible spread of the new crown pneumonia variant virus strain Omicron, investors holding casino gambling stocks need to do a good job of risk management.

Zhou Zhuohua (nicknamed "Ximihua"), the leading intermediary of Macau's VIP Gaming Lounge, was arrested by Wenzhou People’s Procuratorate with the approval of the Wenzhou People’s Procuratorate last Friday (26th) on suspicion of committing the crime of opening a casino in China; Sunday (28th), He was arrested by the Macao police. This morning (29th) the media quoted the news again as saying that the Macao police took coercive measures to detain the man surnamed Zhou and sent him to Coloane Prison.

The police of Macau held a special press release yesterday afternoon (28th) to confirm the arrest of a 47-year-old man surnamed Zhou who claimed to be a businessman and also arrested another 10 people. After preliminary interrogation, the arrested persons admitted to setting up an online platform overseas. Conducts related criminal activities, but refuses to cooperate with other investigations.

This morning, it was reported that Zhou Zhuohua had been brought by the Macao police to assist in the investigation.

(Photo provided by the public)

The half-day market value of the six major gambling stocks has evaporated by about 35.9 billion yuan

Affected by the "Ximihua Case", Zhou Zhuohua's Sun City Group (1383) and Kaisheng (0102) both suspended trading.

Sun Entertainment (8082), which was a personal affair of the Macau police arresting shareholder Zhou Zhuohua, was released on Sunday by an announcement, which was as low as RMB 0.059, and its market value had evaporated by approximately RMB 201 million.

As for Sun International (8029), which Zhou Zhuohua had learned to sell earlier, after opening 7% lower this morning, it was once inserted by more than 17%, reaching a low of 0.71 yuan, and its market value had evaporated by about 343 million yuan.

However, when it comes to "seriously injured" stocks, the gambling stocks are none other than gambling stocks. The entire sector is "all red", and its half-day market value has evaporated by about 35.9 billion yuan.

Among them, MGM China (2282) fell more than 10% in half a day and reported 5.24 yuan in the afternoon; SJM (0880) fell 9% to 5.44 yuan in the afternoon; Wynn Macau (1128) also fell 8.7% in the afternoon. It was reported at 7.12 yuan; Melco International Development (0200) fell 8.1% to 10.04 yuan at midday; Galaxy Entertainment (0027) fell 7.8% to 42.55 yuan at midday; Sands China (1928) fell the least temporarily and still fell 6.3% in the half-day. The afternoon report is 18.48 yuan.

The half-day market value of the six major gambling stocks has evaporated, a total of about 35.9 billion yuan (01 drawing)

Motorola's VIP room revenue is frustrated, and it is not recommended to increase its holdings of gaming stocks

There is no reason why gambling stocks reacted this way.

On Sunday (28th), Mo Tong issued the latest research guidelines on the "Small Rice China Case", which believes that Zhou Zhuohua is the "soul figure" of Macau's intermediary industry. Suncity's business accounts for 40% to 45% of the intermediary market and also accounts for Macau's overall gaming in 2019. Revenue is about 15%. It is expected that Zhou Zhuohua’s arrest will have a significant adverse impact on the gaming intermediary and VIP room industries in Macau.

The bank expects that Macau VIP room revenue will be impacted immediately, and Macau's VIP gaming room revenue will be significantly reduced by 30% to 40% in the next few weeks.

However, the bank added that the revenue of VIP gaming halls actually accounted for less than 15% of the EBITDA (profit before interest, tax, depreciation, and amortization) of gaming stocks in 2019 (before the epidemic). Therefore, I believe that the VIP gaming room business The financial impact of the contraction on gaming stocks is limited; VIP gaming revenue is expected to only drive the industry’s profit contribution by about 2% in 2023.

Motong reminds investors that although only intermediaries are involved in the search this time, it does not rule out that the market interprets the incident as a signal of broader suppression of the entire gaming industry and suppresses market sentiment. Therefore, investors are not recommended to increase their holdings of relevant shares.

(Reuters)

Motong stated that since 2020, the VIP room business has undergone strict review, and the industry has been expected to suffer structural impact. It is estimated that the VIP gaming room business can only promote the EBITDA of gambling operators by about 1% to 4% in 2023, or drive the entire industry. The profit is about 2%, so the "Ximihua case" will not cause the bank to adjust Macau's gambling industry expectations.

However, the bank also reminded investors that although only intermediaries are involved in the search this time, it does not rule out that the market interprets the incident as a signal of broader suppression of the entire gaming industry and suppresses market sentiment. Therefore, investors are not recommended to increase their holdings. Shares.

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Zheng Kunlun, a strategist at Shan Heng Securities, believes that the "Ximi Hua case" is likely to be a catalyst for the decline of gambling stocks.

(Photo by Luo Junhao)

Zheng Kunlun: Recognize the direction of mainland supervision and urge investors to pay more attention

In this regard, "Hong Kong 01" interviewed Zheng Kunlun, a strategist at Shanheng Securities. He believed that the impact of the "Mihua Case" on the gambling stocks is likely to be a catalyst; he bluntly pointed out that the gambling sector has been weak since March this year. It is mainly related to the strengthening of supervision in the Mainland and tightening of capital from the north to speed up the flow of funds to the south.

He described the incident as similar to the "Futu Incident." Earlier, the central government pointed out that online brokerages such as Futu and Tiger Securities were involved in operating unlicensed financial services in the Mainland. The official media also questioned the fact that cross-border brokerages such as Futu had loopholes in capital flow. Reflecting that one of the clear general directions of mainland supervision is to tighten funding policies.

Zheng Kunlun also pointed out that Macau’s gambling industry's income mainly comes from VIP gaming halls and mass market business. Mass market revenues were actually relatively stable before the epidemic, but VIP gaming hall business has slowed down and even showed signs of regression.

Therefore, it is believed that this time the gaming sector once again took advantage of the trend to plunge.

He went on to point out that if investors hold stocks in the gaming sector, they need to be careful and manage their risks; considering that even though Macau has cleared customs earlier than other regions, the gaming business has not improved significantly as a result, and The market is once again worried about the emergence of a new mutant virus (the new coronavirus mutant strain "Omicron"), so investors need to pay more attention.