The casino resort market in the Russian Far East continues to move forward and one of the anchors of the massive project, the Tigre de Cristal is helping shape the future. The Summit Ascent Holdings property has already discovered how much VIP gambling will drive growth and, despite Suncity Group having purchased a majority stake in the casino project last year, Summit Ascent wants to keep its marketing efforts in-house as much as possible. To that end, it doesn’t want Suncity to get overly involved in attracting high-rollers to the property.
Analysts with Goldman Sachs provided an update on the state of affairs at Summit Ascent, based on information provided by the casino operator last week. The company held a “corporate day” last week to discuss what’s going on behind the scenes and asserted that it wants to work on bringing in its own VIP customers and wants to extend credit directly to players, but will rely on Suncity’s large database of names to direct traffic. Suncity owns over two-thirds of Summit Ascent, which owns a little more than 77% of the casino in Vladivostok.
According to the analysts, “While this would allow the company to preserve more profit without having to pay junket commission, it would also mean Summit Ascent has to bear credit risk on its own. Management believes it is manageable, given its limited VIP exposure initially. Overall, they believe US$200 million EBITDA is achievable in the longer run.”
Tigre de Cristal shut down in March of last year, like casinos around the world, because of the COVID-19 pandemic. It reopened in July, ready to get back and pick up where it left off. Prior to the shutdown, the property had seen huge gains in slot and VIP operations, with profit increasing to $10.57 million from the $980,000 it had seen a year earlier. The post-shutdown picture has improved, as well, with the casino showing positive EBITDA (earnings before interest, taxes, depreciation and amortization) for the last six months of the year, as opposed to a loss in the first half. That was backed by a significant jump in VIP revenue, despite continued international travel restrictions, and Summit Ascent believes it can manage its VIP activity on its own going forward.
This doesn’t mean that Suncity won’t have a hand in the operations, though. Suncity’s boss is Alvin Chau, who became chairman of the casino operator when his company purchased its large piece of Summit Ascent. As such, it wields enough power to allow it to call some of the shots and has too much at stake to remain silent. Suncity believes the Korean gambling market needs to be tapped and Summit Ascent explains, “[Suncity] management believes Koreans’ gaming demand is underserved and targets to growing its customer base there, as a way to diversify its exposure from Chinese gamblers. For instance, despite a one-single property 5-hour drive away from the city of Seoul, Kangwon Land contributes over half of Korea’s gaming revenue. Given the proximity between Vladivostok and South Korea (~2-hour flight), they believe Tigre de Cristal should be able to capture such underserved Koreans’ gambling demand.”