Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

SUPPLEMENTAL ANNOUNCEMENT REGARDING ANNUAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2018

Reference is made to the announcement (the ''Announcement'') of Macau Legend Development Limited (the ''Company'') dated 28 March 2019 for the audited consolidated financial results of the Company for the financial year ended 31 December 2018. Terms used herein shall have the same meanings as defined in the Announcement unless the context requires otherwise.

In addition to the information provided in the Announcement, the Board wishes to provide further information in relation to the impairment loss on goodwill of approximately HK$681,986,000 million (the "Impairment Loss").

Background and reasons for the Impairment Loss

The goodwill impaired is relating to the acquisition of Macau Fisherman's Wharf Group ("MFW Group") in the year 2012.

As disclosed in the Announcement, the impairment was made after the Group's management detailed re-assessment on future cashflow forecast of Macau's business in light of factors of (i) the uncertainties arising from the possible economic slowdown in Macau and PRC as a result of trade war; and (ii) the change of the Company's gaming operational strategies. The operation of Legend Palace Casino in Macau Fisherman's Wharf formally was opened and commenced in 2017. After the year end of 2018, when the management of the Company received the preliminary figures of the operation of MFW Group, the following factors were noted and considered, and hence led to the making of the impairment:

  • (i) apart from the hotel operation, the sales performance of non-gaming facilities at Macau Fishermen's Wharf did not meet the originally forecasted figure for the year 2018, and hence the management has adjusted the forecasted growth of visitors to MFW Group and hence expected revenue out of prudence;

  • (ii) the revenue from gaming operation during the first half of 2018 increased compared with that of 2017 and could meet the previous forecast; however, the revenue increasing trend slowed down since the second half of 2018 and could not meet the previous forecast for 2018. This factor, together with the expected uncertainties on economic environment as mentioned and the expected impact on the revenue, lead to the conclusion by the management that the expected cashflow and revenue generated from MFW Group will not meet originally expected level;

  • (iii) as such, the Company expected that the estimated future growth in revenue from MFW Group's operation will be slower than previously expected. According to relevant accounting standard, the impairment shall be made accordingly. The Company has also relied on a valuation report in considering the amount of impairment.

Valuation on the goodwill in relation to the Impairment Loss

The Company relied on a valuation report prepared by an independent valuer using income approach to assess the value-in-use of the Macau Fishermen's Wharf in assessing the impairment on the goodwill. The income approach was adopted after taking into account the operating and industry environment of MFW Group and the nature of its business, and the income approach was considered to be an appropriate valuation method in this case.

Details of value of inputs

The key factors for the value-in-use calculations include (i) discount rates, (ii) growth rates and (iii) expected changes to revenue and direct costs during the forecast period, which cover a period of 5 years after the financial year end of 31 December 2018.

The discount rates are estimated by using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the MFW Group, being a single cash-generating unit (the "CGU"), for which the estimates of future cash flows have not been adjusted.

The growth rates are estimated by reference to the industry and market data. Changes in revenue and direct costs are based on past practices and expectations of future changes in the market.

The Group prepared cash flows forecasts derived from the most recent financial budgets approved by management for the next five years. Cash flows beyond five years are extrapolated using a steady 2.0% (2017: 3.0%) growth rate for the CGU. This growth rate does not exceed the average long-term growth rate for the relevant industry. The pre-tax rate used to discount the forecast cash flows for the CGU is 16.0% (2017: 15.4%).

Accordingly, in view of the aggregate recoverable amount of the CGU is below its aggregate carrying amount, and impairment of HK$681,986,000 was recognised during the year ended 31 December 2018 according to the relevant accounting standard.

Basis and assumptions

The valuer has also taken into account the major factors including the nature and prospect of the concerned business operations; the financial conditions of Macau Fisherman's Wharf; the specific economic competitive element affecting Macau Fisherman's Wharf, the industry and the market which it operates; the market-derived investment returns of enterprises engaged in a similar line of business; and the business risk of Macau Fisherman's Wharf.

The major assumptions made by the valuer included (but not limited to) the following:

  • 1. There will be no major change in the existing political, legal and economic conditions in which Macau Fisherman's Wharf is being operated;

  • 2. the availability of finance will not be a constraint on the forecast growth of Macau Fisherman's Wharf operations in accordance with the business plan;

  • 3. the unaudited financial statements of Macau Fisherman's Wharf as supplied to the valuer have been prepared in a manner truly and accurately reflected the finaical position of Macau Fisherman's Wharf as at the respective balance sheet dates;

  • 4. the profit forecasts of Macau Fisherman's Wharf revealed to the valuer by the Company have been complied based on fair and reasonable assumptions that can be materialised by Macau Fisherman's Wharf; and

  • 5. the operation of Macau Fisherman's Wharf complied with all applicable laws.

There were no significant changes in the value of inputs for valuation nor change in valuation method adopted from these adopted in the previous years.

Shareholders and potential investors may refer to the Annual Report of the Company for the financial year ended 31 December 2018 which is expected to be published on or about 26 April 2019 for details of the impairment.

By order of the Board

Macau Legend Development Limited

Chow Kam Fai, David Co-chairman, executive Director and chief executive officer

Hong Kong, 12 April 2019

As at the date of this announcement, the executive directors of the Company are Chow Kam Fai, David, Lam Fong Ngo (Chow Kam Fai, David as her alternate), Sheldon Trainor-DeGirolamo and Chow Wan Hok, Donald; the non-executive directors of the Company are Tong Ka Wing, Carl and Ho Chiulin, Laurinda; and the independent non-executive directors of the Company are Fong Chung, Mark, Xie Min and Tam Wai Chu, Maria.

* for identification purpose only

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Macau Legend Development Ltd. published this content on 12 April 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 12 April 2019 11:17:04 UTC