Suncity Group Offloads Two Subsidiaries For a Mere $0.18

Controversial junket operator Suncity Group offloaded two wholly owned subsidiaries this week but the sale is not bringing any meaningful money into the company’s bank account. Sunctiy Group sold the companies for a mere HK$1.00 or $0.18. Why has it done this? Because of the long-term benefits the sale brings.

Suncity Group is still reeling from the arrest of its influential former CEO Alvin Chau in November 2021. The Hong Kong Stock Exchange-listed group recently posted a $87.5 million loss for the past financial year. The huge loss was expected because Macau is where Suncity Group drums up most of its business, and COVID-19 related restrictions resulted in Macau remaining under lock and key for months on end.

The company is in dire straits. It is having difficulty paying bills, which could lead to creditors seizing assets. The company can no longer rely on Chau bailing them out, so is undergoing a period of cash preservation.

“Intense cash preservation is the group’s highest priority. The group is now implementing the most uncompromising cost-cutting programme ever. Non-core businesses have been sold and will continue to be sold, such as the disposal of the mainland Chinese property business and the aircraft in 2021.”

Suncity Group Sells Companies to Great Promise Developments

A filing on the Hong Kong Stock Exchange revealed Suncity Group sold the two subsidiaries to Great Promise Developments Ltd. This is a company incorporated in the tax haven of the British Virgin Islands. Zhong Jianhua controls Great Promise Developments; he is one of the lenders to one of the companies sold.

Goal Explore Investments is the first disposed group. It consists of investment holdings and the management of mall operations in China. Boshing Investments Limited is the second disposed group. It is an investment holding company engaged in property development in China.

Suncity Group only receives a nominal sum but the long-term benefits are large. Disposing of the company means it is no longer responsible for the loans or interest payments linked to them. The group guarantees a saving of $24.2 million.

What Went Wrong With the World’s Largest Junket Operator?

There was a time when everything was rosy with Suncity Group. The junket operator made money hand over fist and thought this would continue indefinitely. However, everything began falling apart and doing so at a remarkable rate.

Both Crown Resorts and later Star Entertainment Group stopped using Suncity Group’s junket business. The royal commission into Crown painted a negative picture of the junkets. Ultimately, Crown cut ties in a bid to save its casino operator licence.

It was a similar story with Star. Australia’s second-largest casino operator faces losing its gaming licence for several irregularities. It too cut ties with Suncity Group, who brought in big spending VIPs. The junket operator enjoyed a special VIP room in both Crown and Star properties until the casinos cut ties.

Global COVID-19-related business closures were the final nail in the coffin. Suncity Group mostly focuses its attention on Macau, Australia, and other Asian countries. All three areas endured strict lockdown measures, meaning the group was unable to operate and, therefore, make any money. Restrictions have eased but the gambling landscape is completely different from pre-COVID times.

Share Price Plummets After Chau Arrest

SunCity Group shares spiralled after Macau authorities arrested former CEO Alvin Chau. The billionaire stands accused of using his VIP junket business to run illegal overseas gambling platforms. In addition, Chau faces charges of luring mainland Chinese citizens into gambling.

Chau founded the company in 2007 and was instrumental in building it into the Goliath it is today. He personally finances many of the group’s projects, including a US$1 billion casino in Manila. However, his arrest prevents this from happening now and in future.

The company issued a stark warning following Chau’s arrest.

“As informed by Mr. Chau, he has indicated his intention to resign from the posts of Chairman of the Board and an executive Director of the Company. Shareholders and potential investors of the company are advised to exercise caution when dealing in the shares. The Group is dependent on the financial support from Mr. Chau and his related companies. In the event that the group loses the support of Mr. Chau for whatever reason, the financial position, business, and operation of the group will be adversely affected.”