The opening of the Tigre de Cristal casino in Vladivostok in October last year contributed to a loss of HK$85.4 million (US$11.01 million) in 2015 for Summit Ascent, a majority investor in the project, an even greater loss than the HK$78.9 million posted in 2014, according to the company’s annual results filed yesterday with the Hong Kong Stock Exchange. The loss was attributed to the pre-opening expenses of project management, staff and training costs incurred prior to the start of casino operations. Lawrence Ho, Chairman and non-executive director of the company, however, is confident, stating: “We expect to be running at close to optimal levels on a ramped-up basis sometime during the Summer of 2016.” Adjusted EBITDBA (net income after adjustment for pre-opening expense, impairment loss, depreciation and amortisation, interest, and taxes) amounted to HK$14,346,000 from October 8 until year-end. “We only expect our visitation and gaming metrics to increase,” said Ho in his statement, expounding that the group is “further encouraged by the month-on-month improvements seen thus far during the Winter season.” No table limit Three types of gaming revenue for the casino were detailed; namely, rolling chip business, mass table business and slots business (see Chart for performance breakdown). The group had 321 slot machines operating as of February 2016 and boasted an average of 612 registered players entering the casino daily between test launch and 2015 year-end, approximately 50 per cent of whom were ‘non-Russian (predominantly Asians)’. As stated in the report, the Russian Government does not impose any limits on number of gaming tables or slot machines; as such, the ‘Tigre de Cristal is at liberty to adjust its gaming capacities according to business needs’. The Russian Government does not impose a percentage tax on overall gaming proceeds, but currently has in place a tax on individual tables and slots, with the monthly rates per table and per slot at RUB125,000 (MOP14,735.81) and RUB7,500(MOP884.15), respectively. Integrated Entertainment Zone Summit Ascent holds 60 per cent in Oriental Regent, an investment holding company with entire equity interest in G1 Entertainment – the holder of a gaming licence to conduct gaming activities in the Integrated Entertainment Zone (IEZ) of the Primorye Region. Summit Ascent derives a 3 per cent management fee income of total gaming revenue generated by Oriental Regent. Tigre de Cristal is currently the only casino operating in the Integrated Entertainment Zone. Chairman Ho stated that the group will “expect our monopoly position to remain intact until at least 2018”. Two other groups have indicated they’ll commence property development in the IEZ, while two other groups are expected to reveal their plans regarding the Zone in the near future. Future plans Construction of Phase II of the project is set to begin in ‘late 2016’ with conceptual drawings for the project already commissioned and the project set to open in late 2018. It includes an expected 500 hotel rooms between two hotels, a gaming area with 100 VIP tables, 500 slot machines, a golf course, MICE facilities, shopping mall, nightclub and concert facilities. The master plan for the IEZ includes a water and amusement park, golf courses, ski area and yacht club. According to the report, the group plans to start its ‘rolling business using only casual junkets initially without fixed-room operators,’ to preserve the ‘bargaining power of the casino vis-à-vis fixed room operators’. Fixed room operations for one or two VIP fixed rooms are expected to begin in May after the group has ramped up its ‘own casual junket business’. Plans also include procuring additional and higher value gaming tour operators or ‘casual junkets’ to be signed over the next quarter and accelerating player acquisition programmes in key feeder markets.
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