Summit Ascent Holdings Ltd, a firm controlled by Macau casino investor Lawrence Ho Yau Lung, is aiming to complete its casino hotel near Vladivostok, in Russia, by the second quarter of this year, said a note from Daiwa Securities Group Inc.
“The Russian project is expected to complete construction by the second quarter of 2015, followed by a four- to five-week government inspection and commissioning period,” wrote analysts Jamie Soo and Adrian Chan.
“The casino is expected to open following this and to welcome the first group of VIP customers two to three weeks thereafter,” they added.
The first phase of the project, which is part of the Primorsky Integrated Entertainment Zone (IEZ), near Vladivostok (pictured), was initially targeted to open in the final quarter of 2014.
The casino hotel, to be named ‘Tigre de Cristal’, will target the underserved North Asia gaming market, said the Daiwa analysts, citing guidance from the management of Summit Ascent given at a roadshow for investors in Japan last week.
“Management asserted that the property is located within a 2.5-hour flight radius from an addressable and underserved population of 300 million Chinese, Koreans, and Japanese,” Mr Soo and Mr Chan said.
According to the Daiwa note, Summit Ascent also estimates there is a “US$100m domestic gaming market” surrounding the Primorsky IEZ.
Lawrence Ho – described in a Summit Ascent filing on December 9 as a non-executive director – is also chairman of Melco International Development Ltd. The latter firm has a minority stake in Oriental Regent Ltd, which owns the Russian project. Melco International is also a partner in Macau casino operator Melco Crown Entertainment Ltd.
The Daiwa analysts said that Summit Ascent is in talks with some major Chinese airlines to add additional regular flights from China to Vladivostok, and for junkets to introduce charter flights to the Russian city. The note did not identify which airlines and junkets have been approached by Hong Kong-listed Summit Ascent.
The Daiwa research team believes Summit Ascent will have a favourable tax environment in Vladivostok. “Russia charges a fixed per gaming table and per-slot monthly levy that equals around 1 percent of GGR [gross gaming revenue], by management estimates,” said Mr Soo and Mr Chan.
“The low tax environment thus results in: 1) higher EBITDA [earnings before interest, taxation, depreciation and amortisation] margins when compared with Macau, and 2) casino operators’ ability to pay a higher commission to junket operators (1.7 percent versus 1.25 percent in Macau),” they added.
Cambodia casino operator NagaCorp Ltd has also signed up to build a casino property near Vladivostok, which should begin operations in 2018.
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”Ramp ups [of new Macau casinos] are taking a little bit longer. The market is somewhat volatile at the moment, but we continue to look at all the opportunities and are still very comfortable that things are starting to move ahead”
Chief executive of MGM China Holdings