Paradise Ent posts higher revenue for 2016, loss widens

Mar 30, 2017 Newsdesk Industry Talk, Latest News, Macau, Top of the deck  

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Hong Kong-listed casino equipment maker Paradise Entertainment Ltd said revenue for calendar year 2016 increased by 6.5 percent year-on-year to approximately HKD1.16 billion (US$149.7 million). Such increase was supported by higher sales of live multi game (LMG) terminals and higher revenue sharing from the operation of LMG terminals, the firm said in its full-year results, filed on Wednesday.

The company reported adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of HKD97.5 million for the 12 months to December 31, representing a year-on-year of increase of 40.1 percent.

The group’s loss for full 2016 was approximately HKD355.1 million, compared to a loss of HKD148.9 million for the previous year. The firm said the result “was mainly due to the loss arising from assignment of intangible assets of HKD334.8 million in relation to the assignment and licence of patent and associated technology to International Game Technology Plc.”

In April 2016 it was announced that Paradise Entertainment had agreed to transfer to global gaming and lottery supplier IGT all of its electronic table game technology, patents and other intellectual property. The exception was LT Game table game intellectual property used in Macau.

As part of the deal with IGT, Paradise Entertainment received in 2016 a non-refundable upfront payment of US$12.95 million. The firm is also entitled to a 15-year earn-out payment for every ETG deployment by IGT outside of Macau.

As at end-2016, IGT had deployed 252 LMG terminals in seven casinos in the United States, including an installation at Sands Bethlehem – operated by Las Vegas Sands Corp – with a total of 150 terminals, said Paradise Entertainment.

“Most of machines deployed were under trial or testing period at the end of 2016. As such, revenue from such deployment would be recognised by the group in 2017,” the firm added.

Paradise Entertainment further stated: “This strategic agreement with IGT will not only expedite our penetration into the overseas markets, but also increase the sustainable revenue base of the group.”

In comments included in a company press release following the results announcement, Paradise Entertainment’s chairman and managing director, Jay Chun, stated: “Looking ahead, the group remains cautiously optimistic and will continue to expand our existing businesses.”

The firm deployed in September 2016 what it calls an “advanced version” of its LMG terminal – branded “Fast Betting Terminal” – in the Parisian Macau casino resort. “It was an important milestone for our product development pipeline,” Paradise Entertainment stated in its results filing.

Strong LMG demand

Paradise Entertainment develops, supplies and sells electronic gaming systems under the LT Game brand. The company also provides casino management services in Macau under service agreements with two existing Macau operators.

The firm said the increase in total revenue for calendar year 2016 “was a direct result of strong demand for electronic gaming equipment and system[s] in the Macau market.” The company’s LMG product range offers table games featuring a live dealer but electronic betting and bet settlement.

Revenue generated by the sales and revenue sharing of LMG terminals reached HKD336.9 million in the 12 months to December 31. That compares to HKD201 million in the prior-year period.

Paradise Entertainment did not declare a dividend.

The firm said it sold 991 LMG terminals in 2016 as compared to 236 LMG terminals in the previous year. The group sold an aggregate of 893 LMG terminals to six casinos in Macau – namely Wynn Palace, Parisian Macau, Galaxy Macau, Casino Diamond at Holiday Inn, Casino Babylon at the Macau Fisherman’s Wharf, and StarWorld. Galaxy Entertainment also shipped a total of 98 LMG terminals to four overseas clients.

The firm had revenue sharing agreements covering a total of 1,680 LMG terminals in 2016, according to its annual report.

Sales and revenue sharing of LMG terminals contributed 29.0 percent of the total revenue in the third quarter of 2016. The firm says it has revenue sharing agreements related to LMG operations with several Macau casinos.

Revenue generated by the provision of casino services contributed 71.0 percent of the total revenue for the period. Such revenue declined by 7.3 percent year-on-year to HKD826.4 million. The firm stated that was due to a decrease in overall gross gaming revenue generated by the venues it manages; from HKD1.36 billion in 2015, to HKD1.24 billion last year.

The firm currently manages casino gaming at Casino Macau Jockey Club and Casino Kam Pek Paradise, two properties under the SJM Holdings Ltd gaming licence. It also manages casino operations at Casino Waldo, under a Galaxy Entertainment Group Ltd licence.

Paradise Entertainment announced in February it had hired Chan Kin Man as its chief financial officer. Mr Chan was previously the finance boss of Pacific island casino developer Imperial Pacific Holdings Ltd.

In October 2016, Paradise Entertainment was granted exclusive distribution rights from LT Game Japan Ltd for the latter’s new mechanical slot products in Macau. LT Japan is a company incorporated in Japan principally engaged in the development and manufacturing of gaming products; Paradise Entertainment has a minority holding in the business.

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