Paradise Entertainment’s loss widens fourfold in H1

Gaming equipment provider and casino service firm Paradise Entertainment Ltd saw its loss attributable to owners inflated by more than fourfold to HK$87.93 million (US$11.2 million) in the first half of 2022 from just above HK$20 million a year earlier.

The Hong Kong-listed firm runs Casino Kam Pek Paradise in the downtown of Macau Peninsula, a satellite casino under SJM’s gaming concession, and supplies electronic gaming equipment and systems via its subsidiary LT Game. 

According to the interim report published yesterday (Thurs), the revenue of Paradise Entertainment also plunged by nearly 30 per cent year-on-year to HK$181.1 million in the first six months of 2022.

“[T]he global economies continued to be affected by the prolonged COVID-19 pandemic,” said Jay Chun, chairman and managing director of Paradise Entertainment, in a statement accompanying the report. “The highly infectious variants caused significant disruptions of varying durations in Macau where we principally operate, in particular the latest lockdown in July 2022 in Macau has taken a heavy toll on the Group’s businesses for the provision of casino management services in Casino Kam Pek Paradise and as an electronic gaming equipment and system supplier.” 

He refers to the 44-day outbreak in Macau that started on June 18 and forced the government to impose a 12-day partial lockdown in July to keep the situation under control, when all casinos were shuttered. 

The adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation) from Casino Kam Pek Paradise in the first six months of 2022 reported a loss of HK$23.3 million, versus a profit of HK$39.1 million in the same period a year ago, the report said. 

“The turnaround from profit to loss was mainly due to the decrease in GGR [gross gaming revenue] generated by Casino Kam Pek Paradise when compared with that generated for the six months ended 30 June 2021,” the company said, as the gross gaming revenue generated from the casino dropped 32.1 per cent year-on-year to just HK$283.1 million in the January-June period of 2022. 

The company also originally entered into a deed of HK$60-million loan at an interest rate of 10 per cent with Mr Chun in the first half of this year, but the amount was later doubled to HK$120 million after the reporting period, the interim report said, adding this move was to “strengthen the liquidity” of Paradise Entertainment. 

Looking ahead, Mr Chun said in the statement, “Despite our efforts to mitigate the current market quandary, we expect to continue facing strong headwinds and a lot of challenges from the threats and uncertainty of the outbreak of the Omicron sub-variants or more mutations and the enactment of the new gaming law in Macau in forthcoming years.”

Despite a three-year grace period, the new gaming law — approved and implemented since late June — has prohibited the business model of revenue sharing at satellite casinos that is seen as an important source of income for casino service firms.  

Paradise Entertainment also addressed its cooperation with SJM Holdings, as the city’s current six gaming concessions and sub-concessions will expire by the end of this year and the Macau government has recently launched a public tender for up to six gaming licences that will start in 2023.

“The Group has confirmed its commitment to SJM Resorts to continue providing efficient casino management services for Casino Kam Pek Paradise to 31 December 2022,” Mr Chun said. SJM Holdings holds the local casino gaming rights through SJM Resorts.  

“The Group shall stay tuned on the developments of the new gaming law in Macau in compliance with regulatory changes, as well as identifying cooperation opportunities in order to contribute to the Macau gaming industry within the ambit of the new gaming law,” he added.

In regards to the segment of electronic gaming equipment, the chairman added: “As the new gaming law in Macau has accelerated the demise of the VIP gaming segment, we expect that the demand for our LMG [Live Multi Game System] machines and other ETG [electronic table games] machines should continue to grow.”