Suncity, a resort operator and junket operator, is facing significant challenges following the arrest of its chairman, Alvin Chau, in November. In an effort to ensure the survival of the business, the board of Suncity has announced a program of intense cash preservation and uncompromising cost-cutting. The company has been grappling with loan default claims, financial losses, and the discontinuation of its junket business. To navigate these difficulties, Suncity is implementing stringent measures and exploring new strategies to reposition itself as an integrated resort operator.
Challenges and Financial Losses:
The arrest of Chairman Alvin Chau resulted in a turbulent period for Suncity, leading to the discontinuation of its junket business. Chau has been accused of running an illegal online betting ring and has since stepped down from his position. The company also faced loan default claims, with a creditor asserting that Chau had defaulted on a significant debt. Consequently, Suncity issued warnings about the potential seizure of the business by creditors. In addition, the company reported a net loss of HK$646.2m for 2021, following two years of minimal revenue due to travel restrictions and the closure of the junket business.
Intense Cash Preservation and Cost-Cutting Measures:
The Suncity board is prioritizing intense cash preservation and has implemented an uncompromising cost-cutting program. Non-core businesses have been and will continue to be sold, such as the mainland Chinese property business and aircraft. The board is taking steps to consolidate resources and focus on the company’s survival. The management has also transformed the Hoiana resort in Vietnam into a temporary quarantine hotel, reducing operating expenses while striving to maintain a world-class guest experience. Additionally, the board is considering the sale of land parcels in Niseko and Miyako Islands intended for hotel development in Japan.
Shifting Focus and Repositioning as an Integrated Resort Operator:
Given the uncertain future of the Macau junket model, Suncity aims to reposition itself as an integrated resort operator. With a limited supply of high-end gaming facilities in Asia, the company plans to target traditional gaming business segments, including VIP, premium mass, mass, slots, and non-gaming businesses. By transforming into a pan-Asian integrated resort operator, Suncity intends to meet the rising demand for high-end gaming experiences. The company will concentrate its resources on jurisdictions with sound returns and lower risks, seeking to optimize its operations and adapt to the changing landscape.
Stability in Summit Ascent and Future Expansion Plans:
Suncity’s subsidiary, Summit Ascent, operates the Tigre de Cristal resort in Vladivostok, Russia, which has been performing well. The board states that the local mass and slots businesses have enabled Tigre de Cristal to be self-sustaining, generating positive EBITDA. As part of the cash preservation strategy, the company will continue to focus on the self-sustainability and profitability of Tigre de Cristal. However, plans for resort expansion have been delayed due to the political situation following Russia’s invasion of Ukraine.
Suncity is facing significant challenges following the arrest of its chairman and the discontinuation of its junket business. To ensure the company’s survival, the board is implementing intense cash preservation measures and uncompromising cost-cutting programs. Suncity aims to reposition itself as an integrated resort operator in response to the evolving landscape of the gaming industry. The company will focus on traditional gaming segments, explore new markets, and optimize operations in jurisdictions with favorable returns and lower risks. Despite the difficulties, Suncity’s subsidiary, Summit Ascent, remains stable, generating positive EBITDA and contributing to the company’s cash preservation efforts. By implementing these strategies, Suncity strives to overcome its challenges and secure a sustainable future in the gaming industry.