GGRAsia – Sinophil adopts high dividend payout policy: filing

Sinophil adopts high dividend payout policy: filing

Sep 01, 2014 Newsdesk Latest News, Philippines, Top of the deck

Philippine-listed Sinophil Corp says it will adopt a dividend policy of “paying at least 80 percent of [the] previous year’s unrestricted retained earnings”, fuelled by eventual payments from its participation in the City of Dreams Manila casino resort via subsidiary Premium Leisure and Amusement Inc (PLAI).

The information was included in a so-called “cleansing statement” about the business on Monday issued to the Philippine Stock Exchange.

The firm – which is currently awaiting regulatory approval for a change of name to Premium Leisure Corp – is a subsidiary of Belle Corp.

Belle announced in June it would reorganise its gaming assets under Sinophil, including its 100-percent ownership of PLAI and its shares representing 34.5 percent of online lottery system provider Pacific Online Systems Corp. PLAI controls Belle’s participation in City of Dreams Manila.

On August 18, Belle further announced it had hired Hong Kong-based brokerage CLSA Ltd to “study the feasibility” of the company selling “a portion” of its current equity ownership in Sinophil to public investors.

According to King & Wood Mallesons, an international law firm based in Australia and specialising in advising companies on corporate transactions, cleansing statements typically involve disclosure of “non-public price-sensitive information” so that an acquisition or exercise involving the transfer in ownership of securities can take place.

Monday’s filing says Belle currently has 50.4 percent of what it refers to as “Premium Leisure Corp” (i.e., Sinophil) but is due to enlarge its holding to 90 percent via subscription to new shares.

But Willy Ocier, Belle’s vice chairman and also chairman of Sinophil, on July 21 told GGRAsia that is was “not necessary” for Belle to own 90 percent of Sinophil, and that it was likely a portion of the 90 percent (as eventually enlarged) would be sold to the public.

Sinophil’s cleansing statement outlines what is a complex ownership structure and complex structure of payable fees between various parties relating to City of Dreams Manila (pictured in an artist’s rendering). Some of the complexity relates to the history of the project.

The Sy family, which controls Belle, had originally intended to develop the casino resort with Leisure and Resorts World Corp and its subsidiary AB Leisure Global Inc.

But in October 2012, Belle and PLAI made a series of new agreements with Macau casino investor and developer Melco Crown Entertainment Ltd to advance the scheme instead.

AB Leisure in March 2013 agreed to terminate its initial deals with Belle and in exchange to serve as an advisor to the project, and to receive a share in payments owed to PLAI under the new operating agreement with Melco Crown.

Legacy issues

Monday’s cleansing statement also re-states and updates information relating to the deals that led Belle and Melco Crown to become partners in City of Dreams Manila – formerly known as Belle Grande Manila Bay. The venue, still under construction, is located in an area of Manila dubbed by the authorities as Entertainment City.

In general terms, Belle is providing the buildings for the casino project – which is likely to cost a total of approximately US$1.3 billion and be completed over several phases according to some analysts. Melco Crown is responsible for the fixtures and fittings, and gaming operations management.

The casino licence was initially issued in 2008 by the country’s casino regulator, the Philippine Amusement and Gaming Corp (Pagcor), to a group of companies controlled by the Sy family. It was eventually put under Belle’s control in 2011.

PLAI will after City of Dreams Manila opens receive a monthly payment from a Melco Crown unit called MCE Leisure (Philippines) Corp. The fee will be based on mass market and VIP gaming revenues at the property. The latest filing didn’t specify a date when the opening will be, but investment analysts expect the first phase launch to be either the fourth quarter of 2014 or first quarter of 2015.

Monday’s filing adds: “MCE Leisure may be required to make a further payment to PLAI at the end of every 24-month period if revenues from the project’s net VIP gaming revenues (after certain deductions) are greater than 5.0 percent of the VIP EBITDA [earnings before interest, taxation, depreciation and amortisation] payments being made to PLAI…”

PLAI is obliged to pay AB Leisure a fee equivalent to 30 percent of any monthly payment received from MCE Leisure, less a royalty based on the project’s gaming revenues, states the filing.

It adds: “As PLAI’s 100 percent parent, the company [Sinophil] is entitled to receive all of the economic benefit of payments that PLAI receives once gaming operations begin at the project. However, the company and PLAI have limited control and influence on the operations of Melco and the project.”