Frontier Capital Group Ltd. is expecting to see its profit double two years down the road, thanks to its recent Clark casino acquisition.
Last week, the Australian-listed company announced it is acquiring the Stotsenberg Hotel and Casablanca Casino in the Philippines’ Clark Freeport Zone for $26 million in shares, which will be transferred in three tranches.
Frontier Capital’s shareholders will still have to approve the deal, with a target date for completion in January 2016. Still, that hasn’t stopped the casino investor calculating the possible yield it will get in the next few years.
In a filing to the Australian Securities Exchange on Thursday, the company said it expects its profit to climb to $11.7 million by 2018—from $5 million in 2016—as a result of its “aggressive expansion plans” for the Clark casino.
The Casablanca Casino has a total of 190 slot machines, 36 gaming tables and two VIP rooms. Frontier Capital and its local partner, E!xcite Gaming and Entertainment Inc., now plan to up the number of slot machines to 250, while the gaming tables will increase to 47.
Frontier Capital is already entitled to a five-year profit guarantee of $5 million per annum, while E!xcite expects to get 142.2 million shares of FCG in tranches linked to the profit guarantee. The casino investor said it expects to reach at least $25 million in aggregate profit within the casino’s first three years of full operation.
“The company fully understands the significant upside potential of its planned expansion and with a forecast profit of $11.7 million for 2018, we expect a positive re-rating of our share price and market capitalization,” Frontier Capital COO Ken Wong said in a statement.
Frontier Capital is banking on the Philippine government’s plans to improve the road network and increase flights at the Clark International Airport, which is located less than two kilometers away from the casino resort. Philippine President Benigno Aquino III has already approved an AU$45 million (P15 billion) passenger terminal expansion project at the airport.
FCG said in a previous statement that “the expansion will result in a direct increase of patrons frequenting the Stotsenberg Hotel and Casino.”
The Clark airport currently hosts several air carriers including Qatar Airways, Asiana Airlines, Tiger Air Singapore, Dragonair and Air Asia Berhad.