Cambodian casino operator NagaCorp said it will log an impairment charge of nearly $100 million on a Russian gambling project stalled by the Ukraine war, potentially dragging its earnings into negative territory.
The Hong Kong-listed casino operator said Monday night that the charge on its gaming and resort project in Vladivostok, in the Russian Far East, is expected to be between $85 million and $95 million.
NagaCorp said that the assessment is based on preliminary findings by an independent revaluation, and that depending on where the final amount lands, the bottom line for the first six months of the year could range from a net profit of $3.1 million to a net loss of $6.9 million.
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The company reported a net profit of $83 million for the same period a year ago.
NagaCorp’s disclosure made no specific mention of its main Cambodian casino business, but the figures suggest that the company’s net profit would be around $88 million if not for the Russian impairment charge.
Company Secretary Lam Yi Lin stressed in the filing to the Hong Kong Exchange that “the overall financial position of the group remains healthy.”
According to NagaCorp’s latest annual report published at the end of April, the net carrying amount of the gaming and resort project in Vladivostok was $153.98 million as of the end of last year. Prepayment for the construction of the project came to $126.98 million.
The project has been stalled since the company announced on March 3, 2022, that it would “invoke a force majeure clause set out in its investment agreement with Russian authorities.” It declared that it “would like to suspend the development of the project indefinitely until the circumstance is clearer.”
At the time, NagaCorp did not explicitly state the reason for the move. But its latest annual report clearly pointed to the Ukraine war. “In February 2022, Russia launched a full-scale invasion of Ukraine and many Western countries have imposed sanctions on Russia,” it said, stating that the invasion “has led to disruption on the development of the group’s gaming and resort project in Vladivostok.”
The group showed its intention to make a foray into Russia back in 2013, when it said it would invest at least $350 million in Vladivostok’s Integrated Entertainment Zone. An agreement with Russian authorities was signed in September of that year and a remittance of $8.9 million was sent from NagaCorp’s Hong Kong bank account to its Russian subsidiary in December 2014. A groundbreaking ceremony was held in May 2015.
Source: Nikkei Asia
