Basic introduction: the company is mainly engaged in the development and operation of the integrated resort and holds a 77.5% stake in the Crystal Tiger Palace in Vladivostok, Russia. The first phase of the project opened in November 2015 and is currently undergoing upgrading. The second phase of the project is scheduled for trial operation by the end of 22nd, and the third and fourth phase of the project is still under planning. In addition, the company holds SunTrust convertible bonds, all of which will hold a 30 per cent stake after the conversion. SunTrust is the exclusive operator of Westside City in Manila, Philippines, and the project is expected to be put into trial operation before the end of 22 years. In October 20, Sun City Group, the world's largest gaming agency, became the controlling shareholder of the company, with a shareholding ratio of 69.66%.
The gaming market in the coastal border region is expected to maintain rapid growth: there are four legal gambling zones in Russia, the license granted by the government is indefinite, and the effective tax rate of gambling business is very low in Asia. Among them, the VIP and high-end midfield target customers are tourists from Northeast Asia, while the ordinary midfield and slot machine business is mainly for Russian locals. In the past five years, the number of inbound tourists from the coastal border region where the Crystal Tiger Palace is located has exceeded 50%, mainly due to the increased convenience of visa processing and the increase in the number of direct flights.
In addition, three new casinos will be landed in the Binhai Border region, which is expected to gradually form a cluster effect and attract more visitors.
Crystal Tiger Palace looks at new business in the short term and capacity expansion in the long run: after Sun City becomes the controlling shareholder of Kaisheng, it will bring Crystal Tiger rich resources of high-end customers (Chinese, Korean and Japanese customers). And use your own experience to help Crystal Tiger reposition.
Crystal Tiger plans to add its own VIP and high-end midfield business. The gross profit margin of the existing intermediary VIP business in the casino is about 26%, while that of the self-operated VIP business is close to 60%, and that of the high-end midfield business is close to 70%. In 2019, the occupancy rate of Crystal Tiger I hotel on weekdays and weekends is 63% and 88%, and there is still a surplus of visitor reception capacity. Crystal Tiger II is expected to open for trial operation by the end of 22nd, with more than 120 gaming tables and 600 slot machines planned, and three times the number of hotel rooms.
Kaisheng holds SunTrust convertible bonds, and Westside City EBITDA has great potential: Philippine gaming gross income CAGR is 18.0% in the past five years, and the Philippine government recognizes the role of the gambling industry in boosting the economy. Among them, the Manila casino in the capital accounts for 67% of gross gambling revenue. Currently, casinos operated by Manila Entertainment City include Lichen, City of Dreams, Manila, Okada and Genting World of Manila. As Sun City has been rooted in the Philippines for many years, has opened VIP lounges in the above four casinos, is very familiar with the local gaming market and has accumulated a solid customer base, we believe that EBITDA has great potential after the opening of Westside City.
Risk tips: the risk that the progress of the project under construction is lower than expected; the risk of diverting the opening of other casinos in the coastal border region; and the risk of slow recovery of international tourists affected by the epidemic.
