China star profit soars 47 pct despite gaming profit dive

Hong Kong-listed China Star Entertainment Ltd., which runs Hotel Lan Kwai Fong in the city, announced that its net profit attributable to shareholders had reached HK$168.5 million for the first half of the year, a jump of 46.8 per cent year-on-year despite its profit generated in the hotel and gaming business plunging by more than a half.
The company told Hong Kong Stock Exchange last Thursday after trading hours that its revenue generated in the six months totalled HK$554.5 million, a drop of 7.8 per cent year-on-year from HK$601.7 million.
According to the filing, 84 per cent of its total revenue was generated by its hotel and gaming service operators in Hotel Lan Kwai Fong.
But China Star saw its profit generated in the hotel and gaming segment plunge 56 per cent to HK$56.5 million from HK$128.1 million one year ago. In addition, revenue from the segment also fell 22 per cent year-on-year to HK$467.4 million.
Operating casino business in the property under the licence of Sociedade de Jogos de Macau, S.A.(SJM), the company said its income from VIP gaming tables shrank 51 per cent year-on-year to HK$23.5 million during the six months, while that from its mass market tables declined 22 per cent year-on-year to HK$361.3 million, suggesting the average monthly revenue from the two segments amounted to HK$60.2 million and HK$3.9 million, respectively.
In addition, the gaming service firm saw its income from slot machines plunge 52 per cent year-on-year to HK$4.2 million.
‘Mass market table gaming operations are more profitable than VIP rooms table gaming operations and thus Casino Lan Kwai Fong spent resources to expand its market share in the mass market table gaming operations targeting high-end customers in the mass market table gaming in years before,’ it remarked.
China Star also indicated in the filing that the occupancy rate of Hotel Lan Kwai Fong had reached about 99 per cent during the six months, generating a total income of HK$59.7 million for the company, a slight increase of 5.4 per cent compared to HK$56.7 million one year ago.
‘During the first half of 2015, Macau’s gaming revenue was MOP121,645 million, decreasing 37 per cent from the same period in the previous year. Hotel and gaming service operations in Lan Kwai Fong are unavoidably influenced by the market trend of the Macau gaming industry,’ the company claimed.
Nevertheless, the company expected that its implementation of more stringent cost control measures will enhance the company’s profitability in the near future.
Self-developing four plots
Meanwhile, China Star mentioned in the filing that it is to develop four plots of land near Lan Kwai Fong Hotel itself that it intended to sell for HK$2.23 billion last year.
In November, the Hong Kong-listed company announced that it was selling the four plots of land adjacent to Lan Kwai Fong Hotel, Macau Polytechnic Institute, Forum de Macao and Golden Lotus Square. But the company announced in March this year that the proposed disposal had been dropped.
‘The Company has decided to develop the sites itself which is expected to capture more profit than the Proposed Disposal,’ it said in last Friday’s filing.
The property leasehold rights of the four plots are held by a British Virgin Island incorporated company called Triumph Top Ltd., a subsidiary of China Star Entertainment.
‘Given the superb location of the sites, the current condition of the Macau properties market and the Group’s solid experience in renovation of Lan Kwai Fong, the Group is confident in the development of the sites,’ it claimed.