Asia Pioneer Entertainment Loses $3M in Unpaid Leases
It goes without saying that coronavirus has had a profound effect on the Asian gambling industry. Companies across the continent have been slammed with one of the largest and most unprecedented financial shocks in recent history. It is fair to say that all bets are off, the future is uncertain and things are changing at a rapid pace.
Asia Pioneer Entertainment is one such company facing financial hardship through these difficult times. As a provider of casino hardware, things such as slot machines and electronic table games, the firm is indirectly affected by the demise of the industry. With the casino sector in Macau losing $3M a day, and others across the continent forced into major damage control measures, Asia Pioneer Entertainment has reported that they are struggling to recoup over $3.4M in lease agreement payments.
The indebted casino operators are struggling to meet the payment schedules agreed with Asia Pioneer Entertainment and defaulting on their debts. The large write off of debts is growing by the month, and there doesn’t seem to be any way to recover the lost money at this stage.
According to a filing with the Hong Kong Stock Exchange (in PDF) the firm entered into a financial lease agreement with two casinos in Cambodia and the Philippines. As at the date of the announcement, Siam Star and Glimex have failed to pay Asia Pioneer Entertainment lease rental totaling $3.4M, and as such the lease agreement has been terminated with immediate effect.
Shareholders and Investors Advised to be Cautious
Upon the termination of the lease agreement, Asia Pioneer Entertainment is intending to seek new alternatives. The first order of business is the huge amount of hardware that they have to recover from the Philippines and Cambodia. It has now become clear that the hardware will be returned under the control of Asia Pioneer Entertainment and shipped to a new lessee in the Macau or South East Asia.
The machines appear to be the least of concerns for the firm, and as a publicly traded company they are worried about the potential cash flow problems and the image that this will purport regarding the health of the company. In a letter to the Hong Kong Stock Exchange, the chairman of the company painted clear the situation currently embroiling them.
The Group is expected to write off an aggregate of approximately HK$26 million finance lease receivables from its accounts for the six months ending 30 June 2020. Shareholders and potential investors of the Company are advised to exercise caution when dealing in the securities of the Company.–Allen Tat Yan, Chairman and executive director, Asia Pioneer Entertainment Holdings Limited
Despite the economic shock induced by the onset of COVID-19, Asia Pioneer Entertainment still has immense liquidity, and the firm has various revenue streams they can tap into to remain a solvent company during the crises. Other sides of the business are becoming vital for the going concern of Asia Pioneer Entertainment, and right now the company is pushing to expand its business of providing consultancy assistance to operators in the gaming industry.
Glimex, the firm that sits behind the Palace Casino at JPark Island Resort in Cebu is in possession of 62 gaming machines belonging to Asia Pioneer Entertainment within their venue. The two firms have already signed a new 2 year lease agreement on the hardware.
Business conditions in the Philippines are still under extreme stress due to coronavirus lockdown measures. The industry wide problem is causing casinos all over the world to suffer from a major loss of income, and maintaining the health of company balance sheets is the immediate priority for firms seeking stability in the crises.
As we have seen regarding the short time financial stress of Asia Pioneer Entertainment, the pressure is being felt by firms both directly involved in the provision of gambling services, and those that have their interests indirectly tied to the financial stability of the industry.