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Russia – VIP play could double for Tigre de Cristal

By - 19 March 2019

Analysts believe that VIP revenue generated at Tigre de Cristal in the Russian Far East resort of Primorye could double over the next two years.

Union Gaming Analyst Grant Govertsen said: “Underpinned by a sequentially improving VIP story, as well as continued strong growth in mass and slots (itself driven by enforcement against illegal venues as well as robust tourism trends). We see significant upside potential with respect to the company’s VIP programme on a go-forward basis. We believe the VIP story for Summit Ascent could nearly double by 2020.”

The prediction came as Summit Ascent Holdings, the lead company behind Tigre de Cristal, posted 2018 net revenue of HKD463.2m (US$59m), marking a fall of 1.6 per cent. The slip in revenue saw the operator’s profit almost halved coming in at HKD7.6m compared to HKD13.8m a year earlier.

The company blamed the effect of a ‘weak ruble during 2018’ for the slip saying: “The revenues of the group are denominated in the Russian ruble and a weak ruble during 2018 had a negative impact on the group’s revenue reported in Hong Kong dollars. If the group had translated its total revenue for 2017 and 2018 using the monthly average exchange rates into Russian ruble, revenue would have been RUB3,523.3m and RUB3,734.4m, respectively, which would have represented an increase of six per cent year-over-year.”

Rolling chip turnover, measured as the sum of all non-negotiable chips wagered and lost by players, at Tigre de Cristal in 2018 was HK$15.6bn, representing a decrease of 17 per cent year-over-year.

Rolling chip turnover fell from HKD18.79bn in 2017 to HKD15.56bn in 2018. Mass table revenue increased by 26.5 per cent year-on-year in 2018 to HKD167m and became the main contributor to the profitability of the Group for the year. Slot machine revenue was up by 19.2 per cent to HKD120m during the period.

Chairman Kuo Jen Hao said: “Earlier in the year, we experienced increasing pressure from VIP room operators requesting higher levels of rebates but we refused to give in and erode our own margins. Therefore, we focused our efforts on further developing our foreign mass business and bringing in new VIP agents. The results have been encouraging. While the rolling chip business was indeed weak in the first half of the year, it rebounded in the second half contributed by new agents and the return of some of other VIP room operators. We are still of the opinion that our unique competitive advantages and location will attract new agents, particularly those from Macau, to work at our property in the near future.”

“From the beginning of 2018, we have placed increasing emphasis on the development of our “premium mass” business which targets Asian players,” he added. “The results so far have been quite positive and were also supported by increased flight connectivity and increasing awareness of our property in our target feeder markets. Growth in our mass business, and in particular our ‘premium mass’ business, and strict cost controls enabled the group to post a profit in 2018 and to maintain positive EBITDA momentum. Our slot business primarily targets the local market but has also seen growth from our foreign players.”

Looking to the future, he added: “In order to address the room shortages we currently experience and to expand the utilisation and yields on our existing property’s gaming floor, we have begun preparatory works for the construction of the villas and serviced apartments beside Tigre de Cristal, which will increase our accommodation capacity by approximately 50 per cent after its expected commissioning in early 2020. We are now targeting an opening of the first stage of our Phase II property by summer 2021, owing to our recent changes in substantial shareholders and subsequent alterations in the design and financing options. The first stage of Phase II is expected to significantly increase the existing hotel capacity, gaming tables and slots. This expansion will also include additional restaurants and bars, an indoor beach club, and a premium outlet mall.”

The Chairman also welcomed the introduction of rival casino properties in the region. “We have observed an acceleration of building works by other integrated resort operators in the IEZ Primorye,” he said. “Assuming that our own Phase II project and the other operators’ development plans remain on track, we may see the benefits of a cluster effect as early as 2021.”

NagaCorp expects to open the first phase of Naga Vladivostok later this year whilst Diamond Fortune expects to open its casino in September 2020. CJSC Shambala, one of the operators in the now shut Azov-City, is also looking to open a casino in Primorye.

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