"Hypothetically, in the past AERL just paid attention to whom can repay the loan/credit, e.g., 100VIPs. But now they must make sure the money not only collectable but also clean (requirement from Beijing????). Then 26 VIPs who sources of money are unverifiable so AERL drop them. Just think about it"
A couple of things about that. One, the way the junket system works is the agents bring clients in to the rooms under the umbrella of the promoter he is working with. While the promoter is ultimately responsible for the clients debt to the casino (management's loan to AERL is used as a gaurantee to the casino as a backstop for any uncollectible debt) the agent is on the hook to the promoter. It's the agents who have intimate knowledge of their client's financial situation including where the money comes from. There isn't any guesswork here. Because if the client stiffs the agent, who then stiffs the promoter, word gets around. The agent's reputation suffers so he is less likely to be hired by the junkets to bring in biz. That is why it is typically the case that the agent covers his client's bad debt in the event it happens so he can stay in good standing and keep working.
As for AERL "dropping" clients due to a crackdown I would encourage you to read some of the posts from around the 6th and 7th of Feb. regarding rebuttals to the "Times" article. Also, VIP roll was up in Macau in Dec-Jan. If junkets are dropping clients over concerns about a crackdown what accounts for the increase in roll? It seems to me you either conclude AERL is the only junket out there cutting clients loose (not really logical) or you conclude that they are still being extremely cautious with credit extension. The merits of their policy can be debated but for now I think it's hard to make the case their biz has been is off for any other reason than VIP roll has been depressed over the last 6-9 months because of the Chinese economy causing AERL to become (perhaps overly) conservative with credit.
I guess the other thing to mention is despite lower RCT for the last 4 months the free cash flow and eps have been pretty good. On an annualized basis the Oct-Jan results would translate to about $1.70 in eps.
I'm hoping that the combination of a stablizing Chinese economy and getting past the HK listing application are reasons enough for them to get more aggressive. But it is noteworthy that despite all the positive macro numbers showing signs of a recovery the Jefferies analyst made the comment about there being no reason to think a VIP rebound is imminent. Also that the Janney analyst has VIP growth at zero for 2013. His thinking is out of the mainstream but clearly he must have reasons for making that prediction.