It certainly sounds like there is a large opportunity at the new casino SVH has built. Good on you for taking the time on it and posting something more detailed.
Unfortunately, the company has a lot of debt, circa USD28m and apparently no earnings yet. It looks like it had to renegotiate the bond part of this to push back the repayment date, which was going to all come due this year (USD20m). Quite high interest rates on the debt around average of 8% to 12% isn't helping either.
I'm sure they could make many millions from an operation with that many tables, but it hasn't happened yet. Cash is still going backwards at this point. Presumably, the Tiger's results haven't been up to expectations and the share price looks like it has fallen off a cliff as a result. Not unlike DNA, another 'emerging' market casino operator. Although, DNA has cash flow and a rapidly reducing debt debt profile, at least for now.
I would have to read more about it, but seems pretty risky given they financed this new casino with a lot of debt instead of equity. Mind you, I read that the bank loans they have in Nepal are to be paid over 38 quarterly installments which is 9.5 years! And the renegotiated bonds mean only USD2m is repayable this year.
Perhaps they should be able to trade out of this given the the length of maturity, however there are many covenants not disclosed which could be breached in the meantime, if the Tiger Palace doesn't start producing millions in cash flow going forward. The debt costs would be over USD3m PA alone, and some principle is required every quarter as well, plus bonds periodically maturing. USD8m left in the bank last I saw, but I assume this is a lot less now because the Tiger property is losing money still (Q2 report), plus interest and principle falling due since that Jan update which mentioned cash. Ominously, the latest quarterly update did not provide a cash balance.
Will keep an eye on it, but for a brand new casino on the doorstep on '15m Indian middle class people', the ramp up got of the a bit of a shaky start. 14k people for the entire month on June, the best month by far, isn't demonstrating much of that potential. Hopefully as the property becomes more know this will increase dramatically, like at least double you would hope based on the revenue they are generating from 14k visitors (circa US830k). I assume 'footfall' is total number of visitors to the property...
The Q2 update mentioned Tiger was nearly break even in the June month, or what I gathered it meant. That's about 250k non gaming and 570k gaming revenue per month by the looks of their presentation. So, they are going to have to make a lot more on top of that to pay the millions in interest and repayments coming up, plus generate a return for shareholders and stay in line with covenants. Naturally, with 44 Tables / 216 EGMs at Tiger Palace, they're not short on potential.
SVH Price at posting:
4.0¢ Sentiment: None Disclosure: Not Held
