Hong Kong-listed Summit Ascent Holdings Ltd reported on Monday total net revenue of HKD463.2 million (US$59.0 million) for full calendar year 2018, down 1.6 percent in year-on-year terms, the company said in a filing.
Summit Ascent, which is the lead developer of the Tigre de Cristal casino resort (pictured) in the Russian Far East, posted a profit of HKD7.6 million for the period, compared to a profit of approximately HKD13.8 million a year earlier.
The company attributed the decline in revenue to a “weak ruble during 2018” compared to the Hong Kong dollar performance during the same period. Summit Ascent’s revenues are mostly denominated in the Russian currency, but the firm reports its financial results in Hong Kong dollars.
“If the group had translated its total revenue for 2017 and 2018 using the monthly average exchange rates into Russian ruble, [it would have reported[ an increase of 6 percent year-over-year,” the firm said.
One of the main contributions to the 2018 results of Tigre de Cristal continued to be the casino’s rolling chip operation, which “primarily targets foreign players”. Summit Ascent stated that the firm’s rolling chip turnover declined from approximately HKD18.79 billion in 2017 to about HKD15.56 billion in 2018. Net win after all commissions rebated directly or indirectly to customers from rolling chip business decreased by 35.5 percent year-over-year to HKD109 million in 2018.
Summit Ascent’s casino resort Tigre de Cristal, near the Russian Pacific port of Vladivostok, has been marketed by its promoter as within short flying time of a large swathe of North Asia, a region populated by consumers keen on casino gambling.
Tigre de Cristal is currently the only casino property in operation in the Primorye Integrated Entertainment Zone (IEZ), a casino development area located 50 kilometres (31 miles) from Vladivostok. The Primorye IEZ is being promoted by Primorsky Krai Development Corp, a government-owned company under the Department of Tourism of Primorsky.
VIP rebound in second half
“Earlier in the year, we experienced increasing pressure from VIP room operators requesting higher levels of rebates but we refused to give in and erode our own margins,” Summit Ascent said in its filing. “Therefore, we focused our efforts on further developing our foreign mass business and bringing in new VIP agents,” it added.
Summit Ascent stated that the results of the new strategy had “thus far have been encouraging,” namely in the mass gaming business. “While the rolling chip business was indeed weak in the first half of the year, it rebounded in the second half contributed by new agents and the return of some of other VIP room operators,” the company noted.
Summit Ascent further said: “We are still of the opinion that our unique competitive advantages and location will attract new agents, particularly those from Macau, to work at our property in the near future. We therefore maintain a positive view on the prospects of our rolling chip business”.
Mass table revenue increased by 26.5 percent year-on-year in 2018 to HKD167 million. Slot machine revenue was up by 19.2 percent to HKD120 million during the period.
“Growth in our mass business, and in particular our ‘premium mass’ business, and strict cost controls enabled the group to post a profit in 2018 and to maintain positive EBITDA [earnings before interest, taxation, depreciation and amortisation] momentum,” company chairman Kuo Jen Hao said in a statement included in the filing.
He added: “In order to address the room shortages we currently experience and to expand the utilisation and yields on our existing property’s gaming floor, we have begun preparatory works for the construction of the villas and serviced apartments beside Tigre de Cristal, which will increase our accommodation capacity by approximately 50 percent after its expected commissioning in early 2020. In addition, we plan to finalise the revised designs and financing for our Phase II project in the coming months and are now targeting an opening in the summer of 2021.”
Summit Ascent had previously said it expected to open the first stage of Phase II of Tigre de Cristal in 2019. According to Monday’s release, the first stage of Phase II is expected to “significantly increase the existing hotel capacity, gaming tables and slots”. It will also include “additional restaurants and bars, an indoor beach club, and a premium outlet mall.”
In late December 2017 it was announced that Asian casino investor Lawrence Ho Yau Lung had stepped down as chairman and non-executive director of Summit Ascent. The move followed Mr Ho’s decision earlier that month to sell off his 17.4-percent stake in the firm. The disclosure didn’t mention the reason for that sell-off decision.
In a note on Summit Ascent following the company’s filing, brokerage Union Gaming Securities Asia Ltd stated the casino operator had posted better-than-expected results for the second half of 2018, “underpinned by a sequentially improving VIP story, as well as continued strong growth in mass and slots (itself driven by enforcement against illegal venues as well as robust tourism trends [in Vladivostok]).”
Analyst Grant Govertsen added: “On the heels of Suncity [Group Holdings Ltd]‘s recent acquisition of a small stake (3.29 percent) in the company, as well as obtaining a seat on the board, we see significant upside potential with respect to the company’s VIP programme on a go-forward basis… We believe the VIP story for Summit Ascent could nearly double by 2020.”
The Suncity brand, controlled by Macau casino junket investor Alvin Chau Cheok Wa, is best known for supplying high-value Chinese casino gamblers to the Macau market, but the listed company Suncity Group Holdings – which does not include any profit streams from Macau gambling junkets in its filed accounts – has been increasing its gaming investments into markets beyond Greater China. That is both in terms of new-build resorts such as Hoiana in Vietnam, due to open later this year; and in terms of deals to manage third-party-controlled properties in other markets, such as Cambodia.
The board of Summit Ascent did not recommend the payment of any final dividend for 2018, as it already had happened in the previous year.
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