Hong Kong-listed Summit Ascent Holdings says it plans to begin construction of the US$200 million second phase of Russian integrated resort Tigre de Cristal by the fourth quarter of this year.
But the company has opted not to expand the scale of Tigre de Cristal’s Phase II expansion, opting instead to diversify its revenue streams by investing into other gaming and entertainment markets.
Providing a business update overnight upon release of its financial results for the six months to 30 June 2020 – which saw a loss of HK$47 million (US$6.1 million) on a 63% decline in revenue to HK$96 million (US$12.4 million) – Summit Ascent said the total cost of the phase was now projected to total US$200 million of which it would input US$120 million based on its 60% interest in Tigre de Cristal operator Oriental Regent.
“Due to the recent redesigns with the input of Suncity, the Group has been reviewing and finalizing the conceptual designs of the Tigre de Cristal Phase II development on Lot 10, and planning to commence the construction works in the fourth quarter of 2020, targeting an opening in 2022,” it said.
“This new integrated resort is expected to double the Group’s VIP and mass gaming tables, slots, and have at least twice the lodging capacity of the existing property, and will include four restaurants and bars, additional retail offerings, and an indoor beach club and spa. The Phase II development of Tigre de Cristal will place the Group in a better position to attract and retain customers, especially when other casino operators in the IEZ Primorye open for business in the near future.”
However, Summit Ascent – of which Suncity Group Holdings currently holds a 24.74% stake – revealed it has opted against further expansion of Tigre de Cristal in favor of a previously announced investment into SunTrust Home Developers Inc, Suncity’s Philippines-listed entity set to develop a US$800 million hotel and casino at Westside City Resorts World in Manila.
Summit Ascent will subscribe to HK$847 million (US$109.3 million) convertible bonds in SunTrust, to be paid for by a rights issue that will see Suncity increase its stake in Summit Ascent to 69.78% at a cost of HK$1.24 billion (US$160 million).
“Whilst the Directors remain cautiously optimistic about the long-term prospects of Tigre de Cristal in the Russian Federation, they are of the view that it is in the best interests of the Company to diversify its assets and revenue streams in order to reduce the Group’s reliance on a single revenue source and location,” the company said.
“From a geographic diversity point of view, the Company has been exploring other business opportunities in order to expand the existing business of the Group and to explore new markets with significant growth potential. The investment in SunTrust marked the first step towards establishing the Group’s footprint in the casino and entertainment market of the Philippines and allowing the Group to tap into this growing market, as well as providing synergies to the overall tourism related business in partnering with SunTrust and Suncity.
“The Directors believe that investing part of the net proceeds from the Rights Issue for the Subscription to achieve the diversification is more compelling than expanding the current scale of the Phase II development of Tigre de Cristal.”
Summit Ascent said the group recorded an Adjusted Property EBITDA loss of HK$22.1 million (US$2.9 million) in 1H20 but retains a strong financial position with HK$816.7 million (US$105.4 million) in cash on hand, without any bank borrowings, as of 30 June 2020.
