Cambodia’s NagaCorp intends to submit an impairment charge of almost $100m on its casino project in Vladivostok. [Image: Shutterstock.com]

Ukraine War delays

Phnom Penh-based casino giant NagaCorp has declared its intention to submit an impairment charge of almost $100m on a Russian casino project, flagging up inertia caused by the Ukraine War, which is potentially dragging the Cambodian firm’s earnings into the red.

charges of between $85m and $95m

In a disclosure to the Stock Exchange of Hong Kong (SEHK) on Monday, NagaCorp stated its casino project in Vladivostok’s Integrated Entertainment Zone (IEZ) is expected to come in with charges of between $85m and $95m.

NagaCorp said preliminary findings emerging from an independent revaluation gave it the charges assessment. A lot is riding on that final amount, with NagaCorp stating the bottom line for the first half of 2024 could vary from a net profit of $3.1m to a net loss of $6.9m.

War footing

According to Nikkei Asia, figures in NagaCorp’s SEHK disclosure suggest the firm’s net profit would be around $88m “if not for the Russian impairment charge.” The net carrying amount of the Vladivostok casino project was $153.98m as at the end of 2023, while prepayment for the project’s construction cost $126.98m.

NagaCorp’s headache ostensibly started on February 24, 2022, when Russia invaded Ukraine. A week later, the Cambodian firm put the brakes on its Vladivostok venture. At the time, NagaCorp announced it would “invoke a force majeure clause set out in its investment agreement with Russian authorities” and indefinitely suspend development of the project until the circumstances were clearer.

led to disruption on the development of the group’s gaming and resort project in Vladivostok”

While NagaCorp did not explicitly flag the Ukraine War as the reason for its invocation of force majeure, its April annual report makes no bones about it. “In February 2022, Russia launched a full-scale invasion of Ukraine and many Western countries have imposed sanctions on Russia.” The report added the invasion “has led to disruption on the development of the group’s gaming and resort project in Vladivostok.”

NagaCorp’s Russia campaign began in 2013 with the announcement it would invest, at minimum, $350m in the Integrated Entertainment Zone in Russia’s Far East. After inking a deal with Russian authorities in September 2013, NagaCorp sent a remittance of $8.9m to its Russian sub-brand in December 2014, going as far as holding a groundbreaking event in May 2015.

A different world

The world has changed dramatically since NagaCorp’s started courting Russia in 2013 for Vladivostok’s prime location bordering China and close to Korea and Japan Casino gambling was banned in all three of these countries at the time.

The Ukraine War, Japan’s approval of a casino project in 2023, and Thailand making great strides to have casino resorts by 2027, have changed the appeal of Vladivostok considerably.

According to Nikkei Asia, NagaCorp’s shares on the Hang Seng dipped by 12% to HK$2.95 ($0.38) in early morning trading on Tuesday, while by the end of Monday, the Phnom Penh firm had shed nearly 30% of its value since a mid-May high.

In February, Hong Kong’s Securities and Futures Commission (SFC) warned it may delist two firms once run by dethroned Macau gambling maven Alvin Chau from Hong Kong’s Hang Seng Index. The SFC’s warning stems from its concerns over a $116m sale of assets in Russia affecting two of Chau’s old firms, with industry insiders citing one of those, LET, as having “lost direction of its business in Vladivostok due to sanctions related to the Russia-Ukraine conflict.”