Casino entrepreneur Lawrence Ho Yau Lung, a key backer of the Tigre de Cristal casino project (pictured) in the Russian Far East, says his investment vehicle Summit Ascent Holdings Ltd, is “pleased with the progress made thus far in the ramp up of the business at the resort”.
His comments came in Hong Kong-listed Summit Ascent’s annual report, filed on Tuesday.
The document highlighted that the firm’s 2016 net profit – driven by the first full calendar year of earnings from Tigre de Cristal in the Primorye Integrated Entertainment Zone near the Russian Pacific port of Vladivostok – had been HKD559,000 (US$71,830), compared against a HKD85.4 million loss in 2015. The property launched in October 2015.
Oriental Regent Ltd, through which Tigre de Cristal is operated, generated adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of approximately HKD132 million in 2016.
Summit Ascent holds 60 percent of Oriental Regent, which owns 100 percent of G1 Entertainment LLC, which in turn holds the gaming licence for Tigre de Cristal.
Since April 2016, Oriental Regent has been fully consolidated into Summit Ascent’s results, rather than equity accounted.
Mr Ho said in his chairman’s remarks: “The operations team at Tigre de Cristal has done an outstanding job of generating positive EBITDA at the property level, while maintaining stringent cost controls. Both the mass table and slots business have shown consistent stability and cover the vast majority of our operational expenses, while our rolling chip business, targeting Asian customers, has achieved substantial growth as we continue to address the underserved Northeast Asian market.”
The annual report noted that rolling chip turnover at Tigre de Cristal rose from approximately HKD3.5 billion in first half 2016, to approximately HKD10.6 billion in second half 2016.
Brokerage Daiwa Securities Group Inc stated in a March report, initiating coverage of Summit Ascent, that the institution forecast the Vladivostok market’s gross gaming revenue (GGR) to reach US$150 million in 2017 and potentially US$1.3 billion by 2020.
Mr Ho said the effort of the government in Primorsky Krai, the host region, had “led to continued growth in tourism”.
He added: “They have also achieved significant progress in ongoing improvements to the local infrastructure – in particular the opening of the expressway between the airport and our property in the Integrated Entertainment Zone. The [regional] government is also closer to implementing the simplified visa regime with the relevant Russian authorities indicating that international travellers will be able to utilise this scheme to enter the territory – provisionally from the summer of 2017.”
The chairman also noted Tigre de Cristal was likely to keep its monopoly position in the Primorye Integrated Entertainment Zone “until at least 2019”.
NagaCorp Ltd, the second operator due to open a casino resort there, said in its 2016 annual report in March that the project was “broadly on schedule for operation by 2019”.
Summit Ascent’s Mr Ho noted regarding Tigre de Cristal: “While the year has not been without its challenges, we are pleased with the progress made thus far in the ramp up of the business at the resort and the refinement of our services and offerings.”
One challenge flagged by some investment analysts was a possible increase – initiated at federal level and for all Russian casino operators – in levies payable per gaming table and per slot machine.
Grant Govertsen of brokerage Union Gaming Securities Asia Ltd, said in a January note that even in the event of a doubling of such levies – and based on Tigre de Cristal’s business performance as of that date – it was likely to have only an approximately 2 percent impact on EBITDA.
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