The board of troubled junket at resort operator Suncity will implement a programme of “intense cash preservation” and “uncompromising cost-cutting” in an attempt to ensure the survival of the business.
The junket operator experienced a chaotic end to 2021 and start to 2022 after the arrest of the group’s chairman, Alvin Chau in November. Following this event, Suncity discontinued its junket business.
Chau, who has since stepped down from his position at SunCity, has been accused of running an illegal online betting ring.
Suncity had also been the subject of loan default claims following Chau’s arrest, as an unnamed lender argued Chau had defaulted on a HK$313.6m debt. As a result, Suncity warned that the business could be seized by creditors.
In March, the business then claimed that Gold Yield Enterprises had failed to pay back a US$30m loan to Suncity. Gold Yield Enterprise is a joint venture between Suncity’s Star Admiral subsidiary and Alpha Era, an investment trust, related to the Hoiana resort in Vietnam.
A week later, Suncity warned of a “significant doubt on the group’s ability to continue as a going concern” as it reported a net loss of HK$646.2m (£62.8m/€74.0m/US$82.6m) for 2021.
This loss came after two years of minimal revenue, first due to travel restrictions to its major markets and then due to closing the junket business.
Now, the business said it was taking every step to keep the business alive.
“The board has also ordered the company to consolidate all resources to focus on survival,” the Suncity board said. “Intense cash preservation is the group’s highest priority. The group is now implementing the most uncompromising cost-cutting programme ever. Non-core businesses have been sold and will continue to be sold, such as the disposal of the mainland Chinese property business and the aircraft in 2021.
“Management has also turned Hoiana into a temporary quarantine hotel; assertively cutting operating expenses while trying our best to avoid disruption to guests’ experience in Hoiana as a world-class integrated resort. I
“In Japan, the Group may consider offloading the land parcels for hotel development in Niseko and Miyako Islands.
The business’ Summit Ascent subsidiary operates the Tigre de Cristal resort in Vladivostok, Russia. This business, the board said, was performing well. However, the business did delay its plans to expand the resort after Russia’s invasion of Ukraine in February.
“In Russia, local mass & slots businesses have already enabled Tigre de Cristal to be self-sustaining while generating a positive EBITDA,” the board said. “Cash preservation and self-sustainability through EBITDA generation will continue to keep the group afloat and carry on.
The board also added that – with the Macau junket model now in question, it would now attempt to reposition itself as an integrated resort operator.
“There is a relatively limited supply of high-end gaming facilities in Asia to cater to this rising demand since Macau has now virtually left the VIP junket business,” it said. “As the group continues to transform into a pan-Asian integrated resort operator, the Group will be targeting all traditional gaming business segments, including VIP, premium mass, mass, slots and non-gaming businesses.
“Additionally, the board will focus resources on the jurisdictions with the soundest returns and lowest risks.”
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