Success Dragon has announced that it has put as much as 20% of its existing share capital into a placing agreement in an effort to raise funds for the repayment of loans and for future business development. The agreement stipulates that the shares will be priced at HK$0.24 (US$0.03) and that up to 414.7 million of the shares will be made available.
The Hong Kong-listed casino operator expects to gain around $12.4 million net from the sale. Approximately $6.11 million will go toward business development and about $2.72 million will be spent paying off a director’s loan and other payables. Any balance will be utilized as working capital for the company.
It would appear that the move comes as the company’s cash reserves have fallen substantially. According to reports, Success Dragon now has cash and cash reserves of around $152,000, “all of which were intended to be used for the operations of its existing businesses.”
Revenue at the company declined by 25.7% in its latest fiscal year, according to a filing with the Hong Kong Stock Exchange. The drop includes a decline of 18.2% for its “Outsources Business Process Management” segment, which covers electronic gaming machines. That segment, which accounts for 95% of the company’s overall revenue, lost around $13.6 million on the year.
Overall losses for Success Dragon weren’t as bad this year as they were last. It reported losses of $16.7 million for the most recent fiscal year, but the losses were $19.89 million in the previous period. The company’s OBPM division, on the other hand, saw its losses grow from $891,757 in the last fiscal year to $1.477 million this year. It attributed the losses to the “heavy operating cost and worse performance of one of the operation outlets located at the Landmark Macau.”
The company has been on a losing streak lately. In June, it announced an impairment loss stemming from an investment it made in Primus Power Corporation, a power and storage system developer out of California, in June of last year. Subsequently, it reported a net loss between April and September of last year of about $2.5 million. It is still trying to recover, but apparently is having a tough time finding its footing.
