Summit Ascent's Tigre de Cristal

Bank of America Merrill Lynch has added its voice to other recent commentary pointing to the significant upside for Summit Ascent due to optimism over its projects in Russia and the Philippines.

The investment firm said it’s beginning coverage of the Hong Kong-listed stock with a “buy” rating and price target of HK$2.0, which is about 135 percent higher than current prices.

It says there are three main reasons for its investment rationale. It sees the addition of new capacity in the coming few years as being a significant driver for revenue growth. It also points to parent company Suncity Holding’s VIP database and says the firm will be a beneficiary of China’s belt and road initiatives and trade tensions, though doesn’t go into detail on the latter theme.

In the short-term growth is expected to be led by a recovery in the markets, with gross gambling revenue estimated at HK$642 million ($82.8 million) in 2021, that’s up 190 percent. It sees a further 190 percent gain in 2022 to HK$1.86 billion.

Longer term, it will be capacity expansion that takes over to boost growth, with the second phase of the Tigre de Cristal casino expected to open in 2022 and its Westside City project in Manila scheduled to come on line in 2023.

Westside City is expected to have 400 tables, 400 rooms for the casino hotel and 1,200 slot machines. In addition, Westside/Megaworld will develop a further 2,000 hotel rooms.

Bank of America sees strong local markets and a good location to help the resort to generate GGR of HK$9.6 billion in 2024 and EBITDA of $1.9 billion. It adds this estimate may be conservative as its 37 percent less than Bloomberry Resorts’ Solaire, which is slightly smaller in scale.

Bank of America joins Credit Suisse and Citic Securities, which have both published upbeat analysis on the company in recent months.

In Russia, the resort is seen as benefiting from its proximity to the large northern China market, but also to Japan and South Korea. Vladivostok is only about 2.5 hours flight from Busan and Seoul, putting it much closer than most other potential gaming jurisdictions for Koreans.

While Suncity’s deep database of VIP clients is expected to also help to drive revenue, Bank of America said the company’s efforts to develop direct VIP and premium mass will ensure better margins than with junket VIP play.

The firm said it estimates that 68 percent of its VIP business will be direct and 34 percent of its mass business will be premium. Again, the firm said it believes its forecasts are conservative.