Macau-based casino services firm Macau Legend Development Ltd has signed a letter of intent to sell its Landmark Macau casino hotel (pictured). The buyer, according to a Wednesday filing to the Hong Kong Stock Exchange, is identified as “Li C.K.”, “a substantial shareholder” and “a connected person of the company”.
A report from the Hong Kong Economic Journal identified the buyer as Li Chi Keung. A person of that name as rendered in English is described in the firm’s 2015 interim report has having an approximately 12 percent stake in Macau Legend.
The casino at Landmark Macau, named Pharaoh’s Palace Casino, operates under the casino licence of Macau gaming operator SJM Holdings Ltd.
The planned sale was announced on the same day Macau Legend reported a net loss of HKD268.5 million (US$34.8 million) for the full year of 2015. It made a net profit of HKD478.9 million in the previous year.
“This is an important proposed transaction to the group,” company co-chairman and chief executive, David Chow Kam Fai, said in a statement.
He added: “As we have outlined in the letter of intent, there are numerous terms and conditions to be resolved prior to being able to execute a conditional sales and purchase agreement. The letter of intent will serve as a framework for the negotiations on the definitive agreements.”
Macau Legend said in its filing that the market value of Landmark Macau stood at HKD5.47 billion as of the end of 2015, according to an independent valuation report.
It added: “As such, the company anticipates that the proposed disposal will allow the group to expand its businesses in Macau and overseas without taking on too much additional leverage.”
Mr Chow noted that the operating performance for Landmark Macau declined in 2015. According to the company’s annual results announcement, gaming revenue at Pharaoh’s Palace Casino declined by 34.7 percent year-on-year in 2015, to HKD744.4 million.
Macau’s market wide gross gaming revenue in 2015 declined 34.3 percent compared to the previous year, according to official data.
Macau Legend stated in its filing it decided to dispose of Landmark Macau to focus on “Southeast Asian destinations where the ‘One Road, One Belt’ policy from China is supporting new investment in tourism and tourism-related infrastructure and will also focus on Portuguese-speaking countries.”
The ‘One Road, One Belt’ initiative refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road strategies, proposed in 2013 by Chinese President Xi Jinping. The initiative aims better to connect the countries along the routes and enhance trade across Asia, the Middle East, Europe and Africa through infrastructure development.
Macau Legend began construction in February of its EUR250-million (US$279-million) casino resort in the African island nation of Cape Verde.
Macau Legend stated on Wednesday it remained “firmly committed to the successful completion of the redevelopment of [the waterside leisure facility] Macau Fisherman’s Wharf, and the proposed disposal [of Landmark Macau] will enable the group to focus more on the new hotels, casinos and other tourist-related facilities at Macau Fisherman’s Wharf.”
The Harbourview Hotel, part of the redevelopment project, had a soft opening in February 2015. The company plans to add two more hotels to the development.
Mr Chow said on Wednesday: “Construction for the Legend Palace Hotel is expected to be completed in June 2016, and we are targeting to open this new hotel and the casino by the end of 2016. We intend to expand New Legend, our self-run VIP operation, which has continued to increase its revenue contribution to the group in 2015, into this new hotel.”
Gaming revenue for New Legend rose by 244 percent year-on-year in 2015 to HKD142.1 million. The entity runs VIP operations at both Pharaoh’s Palace Casino and Babylon Casino. The latter is located at Macau Fisherman’s Wharf.
The other new hotel projected for Macau Fisherman’s Wharf – Legendale Hotel – is likely to include a casino, according to Macau Legend’s annual results report. The property has been facing some public opposition after Macau Legend applied to have the building’s height increased by 50 percent, to 90 metres (295 feet). The government has yet to approve the request. In is 2015 annual results announcement, Macau Legend’s management revised the property’s construction completion target date from 2017 to “end of 2018”.
The Macau government confirmed on Monday that the proposed yacht club at Macau Fisherman’s Wharf will have its own border post. International visitors arriving in Macau by yacht will be able to dock at the development’s marina and undergo immigration clearance directly at the Macau Fisherman’s Wharf.
The announcement by Macau Legend of its intention to sell the Landmark Macau property came after the firm dipped into red in the 12 months ended December 31.
“The past year proved to be challenging. The combination of the economic situation in China, the increase in new hotel and casino capacity in Macau and the changing profile of the visitors to Macau were among the key issues that negatively impacted gaming and non-gaming businesses,” stated Mr Chow.
Macau Legend’s total revenue for full year 2015 decreased by 20.7 percent in year-on-terms, to HKD1.44 billion. Gaming revenue was down 29.9 percent to HKD897.4 million.
As at December 31, the group had a total of 179 gaming tables – six fewer than a year earlier – of which 127 were put into operation. The company provided no details on why more than 50 tables were not being used.
On October 2014, Macau Legend said it had been granted “35 additional gaming tables” by the Macau government. In its Wednesday filing, the firm stated that “the additional gaming tables will increase the gaming capacity of the group and support the current Macau Fisherman’s Wharf redevelopment.”
Mr Chow added: “During this current period in Macau, it is even more important that the group continues to better manage its resources, ensures adequate liquidity and continues to take advantage of opportunities to expand our business overseas.”
Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) for the year ended December 31 was HKD268.3 million, a decrease of 64.7 over the prior-year period.
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"We forecast Grand Lisboa Palace will have EBITDA of HKD2.0 billion (US$260 million) with 330 tables by 2022, and HKD3.5 billion with 380 tables by 2023"
Credit rating agency Fitch Ratings