Hong Kong-listed New Silkroad Culturaltainment Ltd is to sell at an anticipated net loss of HKD37.2 million (US$4.76 million) its 72 percent controlling interest in Megaluck Co Ltd, a firm with a foreigner-only casino business in Jeju, South Korea.
The expected net loss on the disposal is based on New Silkroad’s investment in Megaluck Co of approximately HKD63.6 million as of April 30 – which takes into account a set-off or waiver of debt between the target company and the vendor -, relative to the HKD28.4 million consideration for the disposal. The expected loss also includes tax and expenses of HKD2.0 million, according to the filing.
New Silkroad had given notice in a March filing of its intended sell-off regarding the Jeju casino operation.
The HKD28.4 million selling price is to be paid by the suitor, a man called Yu Cheng Kuo, currently a 7 percent shareholder in Megaluck Co. No further details were given regarding Mr Yu. Payment will be in three instalments, the final one due on June 30, 2025.
As of Tuesday’s announcement, the target company is 21 percent owned by a number of other shareholders.
New Silkroad said in the filing: “The strategic decision of disposing of the substantively loss-making investment in the entertainment business served to cut loss and better allocate the group’s resources to other profitable segments.”
New Silkroad also has investment in development and operation of real estate in Australia; and production and distribution of wine in mainland China.
The business to be disposed of, Megaluck Co, had been operating a casino on Jeju island under the name Golden Beach since 2010, and under the moniker MegaLuck currently.
“It owns the gaming licence granted pursuant to the laws of Jeju Special Self-Governing Province, which enables the target company to operate its gaming business,” stated New Silkroad in its Tuesday filing.
New Silkroad stated: “As disclosed in the annual report of the company for the year 2023, in response to the local government’s epidemic prevention work in South Korea, the entertainment business experienced a prolonged period of suspension for more than three years before its reopening in early 2023.”
It added that for three years up to December 31, 2023, New Silkroad incurred losses of approximately HKD283 million, HKD12 million and HKD65 million respectively in the “entertainment business segment’.
The seller said, referring to several years of severe reduction in tourism to Jeju during the Covid-19 pandemic: “As it is expected that the global economy will continue to remain slow and stagnant, affecting the tourism industry in Jeju Island, the board does not consider that the prospects of the target company would turn positive in the near future and considers it appropriate and is prepared to divest the group’s business in South Korea.”
In pre-pandemic trading times, Jeju – which has a number of foreigner-only casinos – has been especially popular with mainland Chinese.
This year China has issued at least one social media post via its embassy in Seoul, warning mainland China residents to stay away from casinos when travelling to South Korea.
