GGRAsia – Chow Tai Fook takes lead on Vietnam casino scheme

Chow Tai Fook takes lead on Vietnam casino scheme

Sep 07, 2015 Newsdesk Latest News, Rest of Asia, Top of the deck

VinaCapital group, an investment management and real estate development firm in Vietnam, has seen one of its units strike a deal that allows interests controlled by a Hong Kong firm to take the lead in developing a casino resort in Vietnam’s Quang Nam Province.

Under the deal – announced on Friday via the London Stock Exchange’s Alternative Investment Market (AIM) – VinaCapital unit VinaLand Ltd has divested a stake it owns in what the latter refers to as the “HAS Project” to Gold Yield Enterprises Ltd, an entity of Chow Tai Fook Enterprises Ltd. The latter privately held conglomerate is controlled by the family of Hong Kong businessman Cheng Yu Tung, a longstanding business partner of Stanley Ho Hung Sun, a founder of Macau casino investor SJM Holdings Ltd.

Under the deal announced on Friday, VinaLand has disposed of its entire 100 percent stake in the HAS Project to Gold Yield. VinaLand said that, under the deal, its stake was valued at 53.5 percent above the unaudited net asset value recorded at the end of the first half of 2015, and had resulted in a net gain of US$10.5 million.

VinaLand confirmed in the press release filed with AIM that its parent VinaCapital was staying connected to the project.

“Given the complexity of the project and the ongoing challenges it faces, the buyer has requested that VinaCapital continue to be involved in the project,” said VinaLand. It didn’t specify what were the challenges.

It has been widely reported that the Vietnam government is mulling whether to allow – possibly on a trial basis at selected venues and with a financial qualification requirement – Vietnamese citizens to have access to casinos in that country. Currently only holders of foreign passports are able to use the venues that do exist.

The Vietnamese authorities have stipulated that new casino resort projects should have a minimum capital investment of US$4 billion per scheme, which a number of investment analysts for the gaming sector say creates significant hurdles in relation to rate of return on invested capital; unless locals are allowed to gamble in the resorts.

There are supporters inside and outside Vietnam’s administration in favour of market liberalisation. Augustine Ha Ton Vinh, an academic who says he is advising the government on liberalising Vietnam’s gaming industry, stated recently that the country could be losing as much as US$800 million a year in tax revenue from Vietnamese who gamble in neighbouring Cambodia.

VinaCapital involved

Since the withdrawal of Malaysia’s Genting Group from the Quang Nam project in 2012, VinaCapital – as the manager – “had been sourcing a new partner with appropriate experience to participate,” said VinaLand’s Friday statement.

“Therefore, as part of this disposal the manager has assumed responsibility for completing a number of conditions that remain outstanding as at the transaction date, effectively underwriting the transaction for VinaLand. The manager is also obligated to purchase an additional stake of 9.36 percent in the project, and will also receive an equity interest of 22.55 percent in return for the transfer of certain economic rights to gaming it had secured in respect to the project,” added VinaLand’s statement.

The Quang Nam scheme is not the only casino project outside Macau that has been linked to interests controlled by Chow Tai Fook Enterprises and the Cheng family.

In June 2014, Australian casino operator Echo Entertainment Group Ltd said in a filing it had a memorandum of understanding with Chow Tai Fook Enterprises for Echo’s bid to develop a new casino resort in Brisbane, Queensland. In July, Echo was named as “preferred tenderer” for that scheme by the state government.

Chow Tai Fook Enterprises is expected to provide 25 percent of the capital for the Brisbane project. Although Echo hasn’t given any public commitment on the minimum amount of money to be invested in the project, media reports have mentioned a figure of approximately AUD2 billion (US$1.47 billion).

In November, the Korea Herald newspaper reported that Chow Tai Fook Enterprises had signed a letter of intent to invest US$1.6 billion in order to create a new South Korean casino resort at Incheon, near the country’s capital Seoul.

On August 27, the South Korean government issued a “request for proposal” from casino investors – with the likelihood that at least two new licences would be issued for gambling resorts, with the gaming component open to foreign customers only.