Boutique casino operator Silver Heritage Group Ltd says the early repayment of some bonds without financial penalty, and the pledging of AUD13.1 million (US$9.3 million) in fresh capital from investors announced on Monday gives the company the chance to ramp up operations at its new, purpose-built casino resort Tiger Palace Resort Bhairahawa, in Nepal.
“We do everything we can to have – in terms of marketing – consecutive monthly growth,” said Mike Bolsover, managing director and chief executive of the firm, in comments to GGRAsia. He was referring in particular to the group’s gaming operations.
The Australia-listed firm also manages a gaming operation at a hotel in the Nepal capital Kathmandu, and another in Vietnam.
“Occasionally you might be flat on a month [in terms of revenue], or slightly down, so this [refreshed financing arrangements] really gives us leeway – or headroom – to weather any storm,” Mr Bolsover added.
The company’s interim results filed on September 3 with the Australian Securities Exchange, said half-year revenue increased by 40 percent to just under US$11.28 million. Tiger Palace (pictured) produced US$2.8 million of that – or circa one quarter of group revenue – in its first full six months of casino business. Tiger Palace, which had a revised capital budget of AUD70.3 million (US$50.6 million), started gaming operations in December.
Mr Bolsover said the firm was looking to develop agent business at Tiger Palace to bring in so-called premium mass players – ones that bet in high multiples relative to a local grind market, but in cash, rather than via the credit system used for traditional rolling chip business for VIPs in places such as the Macau market.
“What we have at the moment is a solid mass-market business and patronage in Tiger Palace. If you look at the numbers we have about 450 [casino customers] a day, spending or losing anywhere from US$50 to US$80 a day,” said the CEO. “So that’s definitely a grind market, but it’s stable and it’s a great platform from which to start – as we have done now – looking at agent business.”
He elaborated on how the agent system worked in the context of India, a main target market in terms of players for Tiger Palace.
“These are people that take players from Delhi, Calcutta, Mumbai; to the three nearest [major casino] places, which are obviously Singapore, Goa and Sri Lanka. We are now in that market,” Mr Bolsover stated.
“So layering on top of the very stable grind and mass-market business, we are now going to start injecting premium play, so that will bring revenues up, and also bring the average yield per player up,” he told GGRAsia.
The executive also gave some colour on the mechanics of such an Indian agent system.
He stated: “It works as a sort of blend between a traditional American junket – where you get tickets to a show or vouchers for a hotel – and a typical Asian junket. If people bring players, then the players and the agents get rolling commission, and occasionally they get a contribution to their travel.”
He added, referring to one of the major VIP junket brands in the Macau market: “It’s not a souped up junket like a Macau business; like a Suncity [Group].”
Mr Bolsover stated: “At no property do we have any credit risk, nor any junkets in the traditional sense.”
GGRAsia asked Mr Bolsover how payments to such Indian agents could be described as “commission on rolling” if the players they brought in were cash players, not traditional credit-based VIPs. “It is direct-play rolling,” he explained.
The Phoenix International Club run by the group in Bac Ninh, Vietnam, produced US$5.93 million– or just over half – of Silver Heritage’s interim 2018 revenue. A significant contribution came from the premium mass segment, stated the CEO.
Customers at that venue are “generally Korean and Chinese expats living there [Vietnam]… It is not junket business, it is not VIP, but it is premium,” he noted.
Mr Bolsover also gave us some commentary on the refinancing exercise in terms of the practical effect of the early payment of some bonds.
He stated: “Before we renegotiated the bonds, all US$18 million was due in tranches between December of this year and August of 2019, so there was no headroom as it were to use the cash for anything else.
“We knew it was extremely unlikely that we’d be able to repay that even if we had tremendous – tenfold – ramp up [in business] on a monthly basis,” the executive told GGRAsia.
He added: “So we spoke with the bondholder with whom we had been in negotiations for a while, and it has – in return for [us] prepaying early some of the bonds, at least US$6 million out of US$18 million – given us a significant amount of room essentially to focus on the business and ramping up, using our capital within the business, as opposed to using every single ounce of money that we had, in order to pay down the bond.”
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Amount that each Macau casino operator paid for the circa six-month extension of their respective contract