Inside Asian Gaming

INSIDE ASIAN GAMING | September 2013 48 The Asian Gaming 50 – 2013 SKYCITY Entertainment Group operates three monopoly casinos in New Zealand—in Auckland, Hamilton and Queenstown—and two in Australia, in Adelaide and Darwin. Until December 2012, SKYCITY also held a 50% interest in New Zealand’s Christchurch Casino, which it sold to co-owner Skyline Enterprises. SKYCITY’s normalized revenue was essentially flat year on year at NZ$948 million (US$743 million) for the 12 months ended 30th June, while normalized EBITDA slumped 2.5% to $303.8 million. There were three major factors mitigating the significance of the decline. First, there was a high base of comparison in the year-ago period, when SKYCITY Auckland in particular had benefited from an estimated $6 million windfall from the Rugby World Cup being hosted in New Zealand in December 2011. Furthermore, the sale of Christchurch Casino means income from there is lost from the latest figures. Then there’s the appreciation of the New Zealand dollar against the Australian, diluting earnings at its Australian properties when earnings there were converted to the kiwi. (The company’s latest earnings announcement also made mention of a group of Asian gamblers absconding after racking up $2.4 million of debts at 38 Nigel Morrison Managing Director SKYCITY Entertainment Group Auckland—a rare enough occurrence to merit attention.) Despite these one-off factors, it’s fair to say the company’s recent growth has underwhelmed, especially in the context of a booming industry in greater Asia. But SKYCITY hopes to return to growth mode with major expansions at Adelaide and Auckland and by attracting more well- heeled Chinese players. SKYCITY won legislative approval from the parliament of South Australia in July to expand Adelaide and intends to invest A$300 million (US$270 million) to transform the property into “a truly world-class integrated entertainment complex,” says Auckland-based CEO Nigel Morrison. The key terms of a revised licensing agreement include a 20-year extension of its monopoly in South Australia to 2035, a lowering of gaming taxes on VIP revenue (i.e. on revenue from Chinese high rollers), permission to introduce cashless gaming and TITO systems, and increases in the permitted numbers of gaming tables and slots. In May, SKYCITY secured an extension of the license at its flagship Auckland property together with permission to add more slot machines as part of an agreement with the New Zealand government to build a convention center in the country’s most populous city. The agreement is awaiting final approval from Parliament. In return for the NZ$402 million convention center, which is expected to open in 2017 as the centerpiece of government’s economic revitalization plans, SKYCITY Auckland will be allowed an extra 230 machine games and more gaming tables. Its casino license, which was due to expire in 2021, will be extended to 2048. Mr Morrison has stated his intention to boost the high roller appeal of SKYCITY’s properties with the addition of new VIP gaming rooms and accommodations. He is well acquainted with the preferences of those high rollers from his previous role as group CFO at Macau casino giant Galaxy Entertainment Group. MrMorrison joinedSKYCITY asmanaging director in 2008. He has also served as CEO of the Federal Group, Australia’s largest private gaming group, and COO of Crown Limited. Before embarking on his casino career in 1993, he was a corporate finance partner with Ernst & Young in Melbourne, specializing in the gaming industry. With his candy-colored bangs, diamonds flashing at his fingers and wrists, a fleet of Italian sports cars in the garage and a fashion model for a wife, financier Stephen Hung could be a walking advertisement for the über-exclusive hotel he plans to open in a few years on Macau’s Cotai Strip. “The willingness of mainland Chinese to spend money on the very best is unprecedented,” he assured The Financial Times earlier this year. The implication, of course, is that’s what they’ll find at Louis XIII, which is slated to 39 Stephen Hung Co-Chairman and Executive Director Louis XIII Holdings Ltd open in 2016 with 246 luxury suites and villas, the only Michelin 3-star L’Ambroisie outside Paris and an invitation-only“Atelier” with not a couture, bespoke or limited- edition goody on the shelves for under $1 million. Peter Marino, who designs flagship stores for luxury brands, has signed on as concept architect charged with bringing the “17th century French Renaissance and Baroque” theme to life. (Don’t mind the historical incongruity. The fat cats won’t.) Mr Hung’s “good friends” Laurence and Francois Graff of the famed diamond merchants are on board, so is Versace, and a fashion designer who claims to be a direct descendant of France’s Bourbon kings has been hired as “special advisor” to Mr Hung and private-equity investor Peter Coker, his co-chairman at Louis XIII Holdings, the project’s Hong Kong-based, Bermuda- incorporated owner. The literature says the resort is “the first of a series of ultra-luxurious lifestyle experiences the Group is planning to offer the world’s wealthiest,” although right now Louis XIII’s sole revenue source is Paul Y. Engineering, a well-known construction management and services company it took over early this year along with PYE’s Hong Kong listing. It was around that time that the project raised half its HK$6.4 billion budget (US$820 million) from a sale of new shares and convertible bonds, $2 billion of which went to buy a company Mr Hung chairs that holds the rights to the Cotai site. The rest is expected to come from borrowings. And the company does boast an impressive list of banking partners. It’s a world Mr. Hung