A Macau shareholder of casino investor Amax International Holdings has questioned the commercial sense of the HK$63.5 million (US$8.1 million) purchase agreement to acquire a group of companies specialising in augmented reality, virtual reality and applications for smartphones and entertainment platforms.
The agreement wad announced on July 18, with a wholly owned subsidiary of Amax to purchase a ‘target group’ comprising Explicitly Grand Investments Ltd. and Hong Kong incorporated company MostCore plus subsidiary Inno Motion.
In a Hong Kong Stock Exchange release the company filed yesterday, Amax International said it had received a letter from the legal representative of Shen Nan (Macao) Investment Co., Ltd, described as a ‘substantial shareholder’ in the company, holding 11 per cent of the total issued share capital. The letter expressed concern by the shareholder regarding the purchase deal, stating it saw ‘no apparent commercial reasons for the acquisition’ and the ‘legitimacy’ of the operations of casino gambling with [Augmented Reality/Virtual Reality] technology.
The shareholder also expressed concern that ‘limited information’ was available for shareholders to make an informed assessment of the acquisition.
Addressing concerns
Previously, Amax stated that the investment was based upon ‘the growing popularity of virtual reality and augmented reality’ as well as the ‘future business prospects of mobile and digital industries’.
In yesterday filing, Amax sought to clarify concerns that the acquisition was ‘highly speculative’ being an investment in an ‘infant business without a proven track record’.
The company mentioned that the targeted group had registered a 2,527 per cent yearly increase in revenues of HK$1.41 million for the year ended 31 March 2017.
‘The Target Group, revenue and client orders are experiencing high growth in the recent year as the VR/AR technology and related applications are growing rapidly as indicated by a number of third-party market research institutions,’ the release declared.
The group to be purchased was also said to have entered into 10 service contracts since 2016 up to the date of the release, with outstanding contract sum to be completed amounting to over HK$4 million.
Amax International also justified the consideration amount due to a HK$64.4 million valuation of the target group as of April 30 of this year, and on the ‘future business prospects of mobile and digital industries’.
The purchase was also said to not require ‘immediate material cash outlay’ with the deal to be made through the allotment and issue of the consideration shares and promissory notes.
Amax considered the purchase would enable the group to be equipped with the latest AR/VR technologies and research capabilities, while allowing the long term expansion of the group’s entertainment business into AR/VR apps and entertainment platforms.
All information granted
Explicitly Grand Investments Limited is a company incorporated in the British Virgin Islands with 50 per cent owned by Wong Kam Wah and the other 50 per cent by Cheng Wai Man.
According to the filing the purchase would allow both men to hold 9.8 per cent of the total issued share capital of Amax International, with the company assuring neither would become a ‘substantial shareholder’.
Amax International Holdings managed the casino hotel property formerly known as New Century, renamed Imperial Beijing Palace Hotel, with the hotel currently shut after its operating licence was revoked by the MSAR Government at the beginning of the year.
In a filing in June, Amax International calculated the loss from its involvement in Greek Mythology casino – the gaming property inside the hotel – at HK$901.2 million for the financial year ended March 31.
