Macau’s Success Universe Group Ltd Announces $18 million Loss

In Macau it’s been no secret that the industry has suffered severely during the pandemic. With reduced footfalls, quarantine restrictions and lack of investment, the land-based gambling sector propping up the city experienced a huge swing in fortunes over the previous 12 months. One of the big names on the street is Success Universe Group Ltd, which has announced a loss in excess of $18.3 million for the last financial period.

Financial planning.

Planning for the financial difficulties of the past 12 months hasn’t been easy for Macau’s casinos – but latest figures suggest the hard times are now behind us. ©stevepb/Pixabay

There are numerous other casinos in the city struggling with a similar set of tough market conditions, but it remains to be seen how they will each respond to the newest challenges of the market. The group is the parent company of one of the most profitable venues on the strip, that being the exclusive Ponte 16 Macau five-star hotel and resort.

Across the board, the group has been dealt a myriad of blows, with the dreaded combination of a reduction in liquidity and increased expenses leaving the statement of profit or loss for the period looking seriously dire. With that being said there are some positive signs that the casino will emerge stronger, and fully recover from this reduction is cash-flow.

Leading the investigation into what happened at the casino over the past 12 months, several auditors have already come out and stated that the decrease in earnings represents a depression of almost 300% year-on-year. Compared to the strong profitability and general financial performance in the year 2019 where the company made nearly $10 million in net profit, the absolute shift in financial performance is to the tune of $18.7 million.

Debt-Financing Methods Deployed to Fuel Future Expansion Effort

Capital has been raised through a variety of different means and methods at Ponte 16 Resort in Macau. Several parties have injected cash and hold large stakes in the company. At the top-end of this list is Success Universe Group Ltd, which hold around 49% of the firm, this huge stake far surpasses that of other minor investment groups such as SJM Holdings.

Since the pandemic rocked the industry, both of these aforementioned entities have been called upon to sure-up liquidity at the firm, and have provided up to $8 million in emergency financing. These liabilities piling up on the balance sheet are seen as necessary and very worthwhile forfeitures to maintain the future stability of the business.

Delivering a premium gaming experience to the Macau strip since late 2008, the Ponte 16 Resort is a 408-room resort covering 270,000 square feet. As with most casinos in this region the licensing dynamics are tricky to follow, and this case is no different in the sense that the parent company SJM Holdings are the ones in possession of the operating licenses for all their subsidiaries.

SJM Holdings is a huge player and serial investor across the Asian land-based casino sector. They’re currently involved in some 19 projects across the region, and leverage their brand name and connections to build stronger ties with the biggest and most formidable players in this region. Big casino names in this portfolio include Casino Grand Lisboa and one project currently in development, the Grand Lisboa Palace.

Cascading Financial Woes Across Macau

As many of the firms in operation across the city of Macau are privately-held, they are not obliged to share detailed financial information. The details they have been making public though have shined a light on just how difficult this year has been for the entire industry. Looking at earnings before interest, tax, depreciation, and amortization, the scale of the contraction is clear, and almost touches 170% of the total from 2019.

The inevitable effect of the coronavirus pandemic on this sub-section of the industry has caused a wave of closures at the city’s biggest casinos. With Macau reportedly bleeding $3 million each day at the height of the pandemic, it is no surprise that firms have sought new and innovative ways to get back to business as quickly as possible.

Beyond the casino sector, the rest of the affiliated industries have to been feeling the pinch. Worst of all is the travel sector, which dipped by more than 70% in sales last year. Similarly and disastrously affected were restaurants, hotels, and live events businesses. With vaccine rollout well-and-truly underway, all stakeholders will be optimistic of a quick bounce-back.

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