Hong Kong-listed New Silkroad Culturaltainment Ltd saw an operating loss for 2017 on its foreigner-only casino business based on the South Korean holiday island of Jeju.
Such deficit from its MegaLuck casino (pictured) was HKD26.9 million (US$3.43 million), compared to a profit of HKD3.6 million a year earlier.
The group-wide loss attributable to owners of the firm for the year narrowed to just under HKD71 million, from HKD92.5 million a year earlier. A factor in the improvement had included “a significant decrease in share-based payment expenses” during 2017.
The firm is said to be developing what it terms an “integrated resort” project – understood to be a reference to a casino resort – on the island. The group said in its Monday filing it would “collaborate with leading global gaming entertainment companies” for its future gaming operations, but didn’t give details.
Its current operation, MegaLuck casino, is housed inside the Jeju KAL Hotel and run via a 72-percent-owned entity called MegaLuck Co Ltd.
The gaming revenue generated from MegaLuck casino for the 12 months to December 31 was HKD122.97 million, a rise of 68.3 percent compared to the prior-year period. But the gross profit of the gaming operation fell by 67.2 percent to HKD12.8 million, due to a “sharp increase in direct gaming expenses which soared by 224.5 percent to approximately HKD110.2 million”, according to New Silkroad’s 2017 results announcement filed on Monday.
The group noted in the filing that what it termed “geopolitical tensions in North Asia” had during the reporting period adversely affected its Jeju gaming operation, which it said “relied heavily on Chinese tourists”. The firm added that it had “stepped up efforts to open up other markets” in order to spread business risk.
During the reporting period, the MegaLuck casino venue hosted 19 baccarat tables, one blackjack table, one cussec table, one roulette table, six “Texas poker tables”, one three-card poker table and 24 slot machines.
Gaming revenue accounted for 37.7 percent of New Silkroad’s overall revenue for 2017. The firm is also engaged in the sale and distribution in China of wine and of a Chinese alcoholic drink called baiju.
In its Monday filing, New Silkroad also stated that it had just obtained project development approval for its integrated resort project “Glorious Hill”, a site described as close to Hallasan Mountain on Jeju island. The firm has said in a press statement in January last year that a “large-scale” casino would be part of this resort project.
Ongoing legal cases
The “Glorious Hill” project – in which New Silkroad has a 55-percent stake – will include five-star hotels, commercial and residential real estate, duty free shopping centre, entertainment complex, healthcare facilities, theme park and golf course, according to the Monday filing.
New Silkroad also noted in its latest stock market announcement, involvement in two pending court cases in South Korea.
MegaLuck Co has been summoned by Jeju District Court, in relation to an “indictment brought by Jeju District Prosecutor Office for outsourcing management of slot machines”. The deal is related to a slot machine leasing agreement signed on March 10, 2013 with Global Game Co Ltd, allegedly in violation of the Tourism Promotion Act in Korea, New Silkroad noted in the Monday filing.
Global Game Co filed in October 2016 a civil lawsuit against MegaLuck Co and an ex-director of that firm, claiming damages up to KRW3 billion (HKD20 million).
New Silkroad said that the court hearings for both of these two court cases had been delayed several times as the “prosecutors’ witnesses had failed to attend”.
“In the event that MegaLuck is convicted, an administrative sanction such as an order of business suspension for a short period and a penalty not exceeding KRW20 million (equivalent to about HKD133,000) may be imposed on MegaLuck,” New Silkroad stated in its Monday filing.
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”We do not believe that reopening the advance notice nomination deadline [for board directors] is appropriate or justified”
Daniel Boone Wayson
Chairman of the Wynn Resorts board of directors