Macau’s new gaming law gives hope to Paradise Entertainment as the demise of VIP prompts demand for EGM. The company’s financial future is dependent Kam Pek’s casino ability to run under SJM’s potential concession and looks at North America for expansion.
Amidst the slag season in the post-pandemic era, Paradise Entertainment Ltd is optimistic about the new gaming laws introduced by Macau Government, the company said in its interim report emphasizing how the new gaming laws introduced by the Macau Administration will boost the demand for slot machines.
“As the new gaming law in Macau has accelerated the demise of the VIP gaming segment, we expect that the demand for our LMG machines and other ETG machines should continue to grow,” the management discussions and analysis portion in the interim report read.
The Group remains confident that LMG machines and other ETG machines have ample room for development in the future, both in Macau and in overseas gaming markets, the report emphasized.
Looking ahead, the Group will brave challenges such as the protracted Covid-19 pandemic, unstable market environment, and geopolitical risks, etc.
Despite the company’s efforts to mitigate the current market quandary, the company management expects to continue facing strong headwinds and a lot of challenges from the threats and uncertainty of the outbreak of the Omicron sub-variants or more mutations and the enactment of the new gaming law in Macau in forthcoming years.
The passing of the new gaming law in Macau by the Macau Legislative Assembly on 21 June 2022 is likely expected to impact the company’s existing operations in Macau as the statement in the company report read, “As a casino management service provider, the operations of Casino Kam Pek Paradise would be affected by the enactment of the new gaming law,” the report claimed.
Macau’s current six gaming concessions/sub-concessions expired on 26 June 2022 and the Macau government agreed to extend the gaming concessions / sub-concessions for a further period up to 31 December 2022.
“The Group has confirmed its commitment to SJM Resorts to continue providing efficient casino management services for Casino Kam Pek Paradise to 31 December 2022,” the report read.
As the seven submissions have been reported against the existing six concessionaires operational in Macau, the report also envisages pessimism, as it read, “If the concession contract between the Macau government and SJM Resorts pursuant to which Casino Kam Pek Paradise is licensed for operation is not renewed or further extended upon its stated expiration date, the Group may cease to generate any casino management service revenue.”
Casino management service revenue is currently the Group’s principal source of revenue and may have a material adverse effect on the Group’s business, financial position, results of operations, and cash flows, the report read.
The Group shall stay tuned on the developments of the new gaming law in Macau in compliance with regulatory changes, as well as identify cooperation opportunities in order to contribute to the Macau gaming industry within the ambit of the new gaming law, the report read.
“With respect to our self-developed slot machines in the North American markets, during the six months ended 30 June 2022, the previous logistic issues concerning delay or cancellation of shipments which we experienced since the outbreak of Covid-19 have been gradually resolved, as the majority of worldwide shipping vessels resumed to the pre-Covid-19 servicing level,” the interim report noted.
Further, due to the general market decrease in the sale price of electronic gaming products, including gaming machines, as a result of the impact of the Covid-19 pandemic on the global economy, as well as the discount for the sale but not lease of the company’s gaming machines offered to its customers for bulk transactions, “the sale price of the gaming machines has therefore become more attractive to the customers,” the report noted.
As such, it has been observed by the company that its customers have developed a tendency to “switch from leasing to purchasing slot machines and gaming products in these markets,” the report claimed.
The Group’s sale of slot machines in overseas markets has been accordingly boosted during the six months ended 30 June 2022, the report claimed.
The company’s flagship product, the LMG machines, made strides in the gaming industry to improve the operational efficiency of casinos and provision of an optimal solution to resolve the issue of the climbing operating costs of casinos, particularly the labor costs of dealers, the report read.