VIP to drive Tigre De Cristal earnings

Monday 12th of December 2016

Hong Kong-listed Summit Ascent Holdings Ltd is expected to hit “mid-teens” EBITDA growth in 2017 and 2018, and outsized growth in 2020 following Phase 2, said Union Gaming in a note on Monday.

According to the brokerage, Summit Ascent’s first mover advantage, combined with an operator-friendly tax environment, and the high potential of Russia’s VIP and locals market are the main reasons behind the bullish outlook.

But the VIP market will be the main driver of earnings in the future, said the brokerage.

“We expect the majority of Tigre de Cristal's revenue and EBITDA to be derived from VIP over the near, medium, and long terms. We believe this is largely by the design of the Russian government, which created certain legal casino zones, including the Primorye IEZ, in areas that generally do not enjoy massive local population density.”

“With respect to VIP, the Vladivostok market… we expect the market to surpass Cambodia and begin to approach Manila due to the positive cluster effect of additional supply over time,” added. Union Gaming.

Visa-free access to Vladivostok for Chinese (and other nationalities), which is expected to be in place around mid 2017 will be a catalyst for VIP growth, said Union Gaming.

The mass market on the other hand, will also see growth.

Union Gaming noted there is currently under penetration from the Vladivostok local population, meaning there could be significant upside for the mass and slots segments.

“Given the low penetration there is significant upside potential for the mass and slots segments of Tigre de Cristal as the company enhances its marketing and promotional efforts. Over a long-term basis, and likely with the help of future supply, we believe the mass and slots story – as derived from locals, expats, and foreign visitors – should be 5x or 6x current levels.”

The growing expat community will also aid in the growth of the segment.

Tigre de Cristal had a soft opening in October 2015, and officially opened in November. It is the first and only casino in operation in the Primorye Integrated Entertainment Zone.

The casino’s second phase, costing approximately $500 million will include 400 to 500 hotel rooms, a shopping mall, a food court, restaurants and bars, conference facilities and banqueting facilities, and a spa centre.

Bricks & Mortar EBITDA VIP Earnings forecasts