Hong Kong’s Chow Tai Fook takes controlling stake in Vietnam’s long-stalled $4b Nam Hoi An casino resort

Map of the Chu Lai Economic Zone, where the Nam Hoi An casino resort is located. Visual from the Quang Nam province portal.

Vietnam-based investment firm VinaCapital has teamed up with Hong Kong’s property-to-jewellery conglomerate Chow Tai Fook Enterprises Ltd to jointly develop the long-stalled $4 billion Nam Hoi An casino resort in central Quang Nam province of Vietnam, the investment company has announced.

Accordingly, VinaCapital’s London Stock Exchange’s Alternative Investment Market-listed fund VinaLand Limited has become a strategic shareholder (instead of being the project’s largest shareholder) by divesting its stake to Gold Yield Enterprises Limited, a unit of Chow Tai Fook, the company run by Hong Kong’s fourth richest person Cheng Yu Tung.

VinaLand has disposed off its entire stake at a total valuation of 53.5 per cent above the unaudited June 30, 2015 net asset value (NAV) of the investment and 36.3 per cent above the NAV at the time of the fund’s extraordinary general meeting in November 2012 (including adjustments for additional investments during this period). This transaction, according to VinaCapital, will result in net proceeds of $10.5 million for VinaLand.

“The disposal of this land is consistent with the company’s strategy to divest selected assets by the end of the current term, as stated at the time of VinaLand’s extraordinary general meeting in November 2012, and net proceeds of the realisations will be returned to shareholders,” VinaCapital said, in a statement.

However, “given the complexity of the project and the ongoing challenges it faces, the buyer has requested that VinaCapital continue to be involved in the project,” VinaCapital said.

Therefore, the company is obligated to purchase an additional stake of 9.36 per cent in the project, and will also receive an equity interest of 22.55 per cent in return for the transfer of certain economic rights to gaming it had secured in respect to the project.

VinaLand had purchased the project–a mixed use township incorporating residential, commercial, hospitality, leisure and gaming–in 2007 and partnered with Malaysia’s Genting Berhad, with the former owning 80 per cent. However, the Malaysian company had pulled out in 2012 due to Vietnam’s restrictions on gambling business, and VinaLand has been seeking a new partner since then.

Current regulations in Vietnam stipulate that only foreign passport holders can access casino services. “Vinaland had completed initial investments into the project, however continuing with such a large scale, long term development would require significant future capital commitments, which does not fit with VinaLand’s current cash return strategy. This transaction is the eleventh full disposal since VinaLand’s extraordinary general meeting on November 21, 2012. We believe this is a very positive outcome for our shareholders given VinaLand’s current mandate and will allow for additional capital to be distributed as a result”, said David Blackhall, VinaCapital’s managing director.

Meanwhile, local media reports said that the project is expected to start next year. The first phase will include resorts, amusement park, golf course, premium villas and apartments, worth a total of some $500 million.

The partnership had, in fact, been reported earlier in 2015. The Quang Nam provincial publication had said that Chow Tai Fook had agreed to cooperate with VinaCapital in the Nam Hoi An casino resort project after Genting Berhad withdrew.

Chow Tai Fook, through its New World Development unit in Vietnam, already has a presence in the country with two large hotels in Ho Chi Minh City – the New World and the Renaissance Riverside.

The determination of VinaCapital in seeking investors in the project represents its bet on a possible removal of the casino business restrictions that are currently in place in Vietnam. Sheldon Adelson, chairman of the US casino major Las Vegas Sands Corp, had earlier said he would invest in a multi-billion dollar project in the country if the regulations were relaxed.

In a bid to fortify its casino business, Hong Kong billionaire Cheng Yu Tung acquired 70 per cent of Sun City for $948 million. Sun City, based in the world’s busiest gambling hub of Macau, had also shown its interest in the Nam Hoi An development, reported the bizhub.vn.

Late last year, the Vietnamese government mulled changes in regulations for casinos in the country even as it gave the green light for another project on Phu Quoc Island.

In March, Reuters cited industry analysts saying that Vietnam is within easy reach of wealthy Chinese who provide the lion’s share of the region’s gaming revenue; the report added that the country was poised for an annual gaming revenue of $3 billion, if the law eased.

In 2013, Australia’s ISC Corporation also expressed its keenness to invest billions of US dollars in casinos in the northern coastal province Quang Ninh.

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