Casino junket investor Iao Kun Group Holding (IKGH) saw its net losses more than quadruple in Q2, reflecting the turmoil the company has endured over the past year.
Figures released by IKGH on Thursday show VIP gambling turnover falling 51% year-on-year to $900m in the three months ending June 30. Revenue fell 52% to $10.6m, while net losses came to $104.4m, a significant downturn from the $23.8m loss the company reported in the same period last year.
IKGH took pains to note that the bulk of its quarterly losses came via a one-time $97.3m impairment of intangible assets. The company says that if you strip out all the negative one-offs, its quarterly loss was a far more reasonable $3m. So, you know, hooray.
IKGH has projected full year VIP turnover will fall to between $2.5b and $3b this year, but the company claims those numbers will still allow it to “theoretically” operate at cash flow breakeven, assuming that VIP win rate doesn’t far too fall out of whack.
HOW’D WE GET HERE
IKGH has suffered 23 straight months of VIP turnover declines, and it has been forced to close three of its five Macau VIP gaming rooms in recent weeks. Two of those rooms were at Galaxy Entertainment Group casinos, and Galaxy claims IKGH didn’t leave, it was kicked out over unspecified breaches of contract.
Meanwhile, IKGH’s stock price has fallen below $1, putting the company out of compliance with the NASDAQ exchange’s minimum bid price. IKGH has been given 180 days to right the ship or face delisting.
Small wonder then, that IKGH is frantically trying to diversify its business, primarily via its $102.6m deal to buy the Jeju Sun Hotel & Casino in South Korea from casino operator Bloomberry Resorts. But that deal isn’t finalized, and questions remain as to whether IKGH will be able to make it to the finish line.
GRIM FACTS
IKGH director Jim Preissler told analysts that the company was still finalizing its acquisition finances but it had convinced Bloomberry to extend the deal’s closing date. With its stock in the tank, Preissler said IKGH planned to fund the acquisition through debt, “because effectively equity is now off the table.”
Preissler said IKGH was trying to collect on some of the $159.2m in outstanding VIP debts the company is carrying on its books. Around $40m of this is over 180 days outstanding and Preissler acknowledged that some of this “will be challenging to collect.”
To date, IKGH has been tight-lipped about its 17-month old junket deal with Australian casino operator Crown Resorts. On Thursday, Preissler said Australia was “not a meaningful contributor right now. And I don’t think that’s going to change in the foreseeable future.”
Preissler said a lot of junket operators had “pulled back” their Australian operations. IKGH was only doing “time to time, independent trips” to Crown Perth and Crown Melbourne with VIPs in tow because “there’s not enough business interest in Australia” to operate a permanent gaming room.
