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Summit Ascent likely to slow Russian Phase 2 development: analyst

Thursday, 30 November 2017 05:59
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Macau-based operator Summit Ascent will likely slow down the Phase 2 development of its Tigre de Cristal resort in Vladivostok, Russia if regulatory uncertainties aren’t eased soon, according to Union Gaming analyst Grant Govertsen.

The prediction follows a first reading of a bill by the Russian Duma that would see the possible gaming tax applied to each gaming table or machine doubled, potentially increasing Tigre de Cristal’s monthly tax bill by RUB9,020,000 (US$154,770).

As reported by Inside Asian Gaming in early November, the draft bill proposes doubling the maximum monthly tax rate on each gaming table from RUB125,000 (US$2,145) to RUB250,000 (US$4,290) per gaming table and on each gaming machine from RUB7,500 (US$129) to RUB15,000 (US$258) per gaming machine.

Tigre de Cristal has 55 gaming tables and 286 gaming machines.

Govertsen also pointed to a lack of enforcement by Russian authorities against illegal gaming venues as a major obstacle in Tigre de Cristal tapping into the domestic market

“We believe that the Vladivostok locals market remains significantly under-penetrated, with the company reporting just ~HK$108 million in mass table and slots GGR in 1H17. For a population of ~600k in the city itself, this amount of GGR is too low,” he said in a Wednesday note.

“However, and while there has been some enforcement against illegal gaming venues in much closer proximity to the population base relative to the company's property, the vast majority of locals-oriented GGR is still being captured by illegal venues. Should no further enforcement occur this could effectively flatline mass/slots GGR on a go-forward basis, and, when combined with a potential doubling of taxes, is likely to delay future phases and the developments of the other licensees.”

Govertsen said that he “would expect the company to slow-play development of Phase 2, which is currently expected to come online 2H19” – particularly given the lack of progress of other licensee casinos which are needed to create a cluster effect.

He also noted Chairman Lawrence Ho’s decision to sell down his stake in Summit Ascent earlier this year from 27% to 19% was a possible indication that he sees greater opportunities elsewhere.





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