VIP gambling room investor Iao Kun Group Holding Co Ltd reported on Thursday a wider net loss year-on-year for the second quarter of 2016, which it attributed to an “impairment of intangible assets”.
Such net loss for the quarter – measured by U.S. generally accepted accounting principles (GAAP) – was US$104.4 million, or US$1.65 net loss per share (basic and diluted), compared to a net loss of US$23.8 million, or US$0.38 net loss per share (basic and diluted), for the same period of 2015.
“During the second quarter of 2016, Iao Kun incurred a one-time US$97.3 million impairment of intangible assets, while during the second quarter of 2015, Iao Kun incurred a one-time US$17.8 million impairment of goodwill,” the firm said in a statement to Nasdaq in New York.
“Apart from the one-time impairment of intangible assets, the net loss was primarily due to a significant decrease in revenues as a result of lower rolling chip turnover and lower win rate, partially offset by lower commissions to junket agents,” the firm added.
Iao Kun said it recorded revenue of US$10.6 million for the second quarter of 2016, down 52 percent from a year earlier.
During the reporting period, Iao Kun’s VIP room gaming promoters and collaborators promoted five VIP gaming facilities in Macau. The junket group reported unaudited rolling chip turnover of about US$900 million for the three months to June 30, down by 51 percent from the prior-year period.
The firm’s rolling chip turnover for the first eight months of 2016 was down 50 percent in year-on-year terms, to US$2.41 billion.
Iao Kun announced on September 2 a “comprehensive strategic review” of its operations in Macau in order to “enhance its operating performance”. The firm announced then that it had shut down its VIP gaming room at Sands Cotai Central – a property operated by Sands China Ltd – with effect from August 31.
“As we expect that the VIP market in Macau will continue to be challenging for the foreseeable future, we commenced a strategic review of our operations to reduce expenses and continue to preserve our capital,” said Lam Man Pou, chairman of Iao Kun, in a statement.
Iao Kun-related junket operations have also been halted in two VIP rooms at, respectively, Galaxy Macau and StarWorld Hotel, two properties developed and run by Galaxy Entertainment Group Ltd.
In Thursday’s filing, Iao Kun said that following the closure of three of its VIP rooms in Macau, it was revising its rolling chip turnover guidance for 2016 to between US$2.5 billion and US$3 billion.
Iao Kun’s business partners still promote two high roller facilities in Macau casinos, namely at: the City of Dreams Macau resort of Melco Crown Entertainment Ltd; and at Le Royal Arc, the latter a venue which operates under the gaming licence of SJM Holdings Ltd.
On a conference call following the results announcement, Iao Kun’s management said it had approximately US$159.3 million to collect in extended credit, including about US$40 million of doubtful accounts.
“Around US$40 million is over 180 days [old] and the management right now is actively collecting the money from the agents. At this point, we’re still confident to collect that,” said Iao Kun’s chief financial officer, Ryan Yip, on the conference call.
Iao Kun said last week it been granted a six-month grace period to become once again compliant with the minimum bid price of US$1.00-per-share necessary for its listing in Nasdaq.
Following the results announcement, Iao Kun’s share price fell 3.1 percent, to close at US$0.40 per unit.
Iao Kun’s management additionally said it was trying to find alternatives to finance the acquisition of the Jeju Sun Hotel and Casino on Jeju Island, South Korea. The junket group announced in June that it was buying the Jeju property from Bloomberry Resorts Corp for a total consideration of KRW117.5 billion (US$106.3 million).
“For Jeju, for example, the goal is to try to do this through debt financing because effectively equity is now off the table,” said Jim Preissler, director of Iao Kun Group, on the conference call.
“We’re still working to finalise our financing agreements and will provide additional updates when available. We’re also in negotiations with respect to bringing aboard a solid team to manage the casino operations. In the interim, we and the seller have agreed to extend the required closing dates to the acquisition,” Mr Preissler added.
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”Given that the blanket casino closure [in Macau due to Typhoon Mangkhut] happened on an all-important weekend day… we expect that somewhere between MOP1.1 billion [US$136.2 million] and MOP1.5 billion in GGR will be lost”
Analyst at Union Gaming Securities Asia