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Russia – Drop in Russian tourists sees Summit Ascent plan to up its stake in Manila development

By - 23 August 2023

Summit Ascent, owner of Tigre de Cristal casino resort nestled near Vladivostok in the Russian Far East, plans to up its ownership in Suntrust Resort Holdings, a Philippines developer behind a US$1.1bn casino in Manila’s Entertainment City.

Suntrust is developing Westside City Project in Entertainment City, Manila, the Philippines. When all phases of Westside City Project are ready, it will consist of a casino resort with over 450 five-star hotel rooms as well as shopping malls, theatres, restaurants, and shopping streets.

Summit explained: “The group has decided to diversify since 2020 and subscribed to the convertible bonds of Suntrust prudently by leveraging the investments made by our parent company, LET. Our engrained knowledge of the gaming sector naturally inclined our attention to seek one of the best and one of the most rapidly growing emerging gaming markets in Asia – the Philippines. More notably, the Philippines also serves as an international tourism market, attracting customers from diverse demographics such as South Koreans and Japanese, indicating its extensive market appeal.

“This is echoed by the Philippines gaming regulator PAGCOR which announced in July 2023 that it had booked a 35.6 per cent increase in total income from fees and taxes charged in the first six months of 2023 to PHP36.2bn (approximately HK$5.1bn), boosted by a 48.7 per cent increase in industry-wide gross gaming revenues to PHP136.4bn (approximately HK$19.4bn). The recent announcement of the group’s restructuring of its financial assistance to Suntrust is a step towards that direction. It is aligned with our goal of eventually achieving higher potential ownership of Suntrust for capital appreciation while ensuring the significant amount of the convertible bonds already invested in the project is preserved as construction of the new integrated resort in Manila is building in progress and expected to commence operations in 2024.”

The group has also just completed the acquisition of the land parcels in Miyakojima City, Okinawa Prefecture of Japan in July 2023 for developing into a luxury hotel with seaside cabins.

In the first half of 2023, Tigre de Cristal recorded a positive Adjusted EBITDA of HK$57m, compared to HK$60m in the first half of 2022. The decrease was mainly due to the increase in gaming tax, employee benefits expenses and general and administrative expenses. Due to the ban on Russian air space, rolling chip business resumed modestly in the second quarter of 2023. Rolling chip volume at Tigre de Cristal was HK$7.3m in the first half. Mass table drop increased by nine per cent to HK$385m in the 1H 2023, compared to HK$354m in the 1H 2022. Electronic gaming volume was HK$2,418m in the 1H 2023, an increase of 11 per cent compared to HK$2,181m.

Summit stated: “Against the backdrop of economic uncertainty since late February 2022 due to the Russia-Ukraine conflict, the Group continued to maintain stringent cost controls during the period. Total operating expenses incurred by Tiger de Cristal were HK$126.1m in the 1H 2023, increased by seven per cent compared to HK$118.2m in the 1H 2022. Besides the inflation, the general increase in operating expenses was justifiable to cope with the recovery of the local business after the relaxation of the social distancing measures related to the COVID-19 pandemic.”

“With local business swinging towards an upward trajectory, the near-term outlook coming from its Russian locals for the resort appears steady. Nonetheless, the drastic drop in the number of inbound tourist arrivals in the Russian Federation due to geopolitical tensions has been unprecedented and we have taken every action to mitigate the impact on the Group. From a risk management perspective, given uncertainties associated with the ongoing Russia-Ukraine conflict, compounded by Western countries’ sanctions and the ban on Russian airspace, have impeded the free flow of funds. Thus it may not serve our shareholders’ interests to continue deploying capital in building the TdC Phase II. During these
challenging times, the group has been pursuing all available options, as well as potentially looking for strategic local partners who might be able to bring value in operating the integrated resort.

“Despite the political complications that have hindered our expansion plans for Tigre de Cristal, we remain committed to identifying and investing in flourishing markets within the hospitality and gaming industry,” it added.

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