China Crack-down Vindicates Silver Heritage Group Limited Decision
Asian casino operator Silver Heritage Group Limited has declared that its decision to select Nepal as the home for its latest development has been vindicated following a recent announcement by a top Chinese government minister that his nation intends to continue its two-year crackdown on cross-border gambling.
Sydney-listed Silver Heritage Group Limited recently increased the budget for the under-construction Tiger Palace Resort Bhairahawa venue, which is located only about seven miles from the Nepalese border with India, by over 34% to $53.8 million while revealing that the venue’s 26,597 sq ft casino could begin operating its assortment of 200 slots and 52 gaming tables as soon as November.
David Green, Chairman of Hong Kong-based Silver Heritage Group Limited, used his firm’s annual financial results to state that his firm was right to focus on players from India with the coming Tiger Palace Resort Bhairahawa rather than those in China and pointed to the October arrests of 18 employees of Australian casino operator Crown Resorts Limited as a key indicator of what the future may hold.
“The detention of Crown Resorts Limited employees in China in October of 2016 has exposed the significant risks associated with China-facing VIP programmes, [which are] calculated to encourage high-value mainland [Chinese] players to visit casinos,” wrote Green, who once served as a gaming regulation advisor to the government of Macau. “The reliance of that [China VIP] market on credit has also exposed the fragility of the so-called junket operators who typically source high-value players for casinos outside of China.”
Chinese President Xi Jinping initiated an operation dubbed “Duanlian”, which in Chinese translates as “to break the chain” and is aimed at stopping locals from travelling abroad in order to gamble, in February of 2015 while last month saw Guo Shengkun, Public Security Minister for China, use a meeting in Beijing to proclaim that his office intended to continue investigating and prosecuting “work units and individuals who induce and organize tourists to visit overseas casinos”.
By targeting players in the neighboring Indian state of Uttar Pradesh, Green explained that the Tiger Palace Resort Bhairahawa would moreover have “no exposure to gaming credit risk or to the reputational and business risk presented by under-capitalized junket operators”.
However, Green noted that Silver Heritage Group Limited had suffered in 2016 as a result of shortfalls from its existing casino operations, which include the Phoenix International Club near Hanoi as well as The Millionaire’s Club And Casino inside Kathmandu’s Shangri-La Hotel And Resort, as well as delays in opening the Tiger Palace Resort Bhairahawa.
“While our full-year results for the 2016 financial year came in slightly better than was anticipated at the time of the progress report, it failed by some margin to meet our prospectus forecast,” wrote Green. “The board recognizes that this is both an unacceptable and unsustainable result and I assure you it is committed to implementing measures that will improve operational performance, see the completion and successful opening of the Tiger Palace Resort Bhairahawa and provide a platform for the pursuit of the future growth and value accretion opportunities available to your company.”