Silver Heritage Group Limited 2-for-1 Entitlement Offer to raise A$19 million 30 June 2017 ENTITLEMENT OFFER │ SILVER HERITAGE GROUP Page 1
EXECUTIVE SUMMARY Silver Heritage is seeking to raise A$19.0m (US$14.4m) to complete the • construction of Tiger Palace Resort Tiger Palace Resort is being built to satisfy strong demand for gaming • opportunities in India, underpinned by excellent macro factors Once opened, Tiger Palace Resort will be South Asia’s first five star • integrated resort - a world class asset Staged opening of resort facilities: • Hotel and hospitality facilities to open in September - Full resort opening, including gaming, in November - Completion shortfall of A$15.5m (US$11.8m) to be funded with existing • cash and the proceeds from the Entitlement Offer Entitlement offer on a 2 for 1 basis at A$0.05 per New Share, which • represents discounts of: 77.3% to the most recently traded price of A$0.22 - 87.5% to the IPO price of A$0.40 - 81.5% to the NAV as at 31 December 2016 of A$0.27 - Existing Silver Heritage operations have started 1Q17 strongly: • Phoenix gross profit of A$1.7m (US$1.3m), up 53% on 1Q16 - TMCCK gross profit of A$193k (US$147k), flat on 1Q16 - Architect’s renderings of Tiger Palace Resort Page 2 ENTITLEMENT OFFER │ SILVER HERITAGE GROUP
INVESTMENT CASE FOR TIGER PALACE RESORTS 1. INDIAN MIDDLE CLASS CONSUMPTION • India will have the world’s largest middle class consumption on an annual basis by 2030 • US$12.8 trillion (vs. US$10 trillion in China) 1 2. ACCESSIBLE POPULATION • Uttar Pradesh, the adjacent state to Bhairahawa has a population of 215 million • India’s population currently 1.32bn 3. IMPROVING ROAD INFRASTRUCTURE • India: the Northern States of the country are serviced by major Indian highway networks • Nepal: Major roads are being upgraded to six- Rendering of upgraded Gorakhpur Airport Rendering of Bhairahawa International Airport lanes from the Indian border northwards 4. AIRLIFT TO TIGER PALACE RESORT • Domestic airport in Bhairahawa will be upgraded to International by mid-2018 • Domestic Airport in Gorakhpur currently being upgraded - welcome center and lounge for Tiger Palace customers Bhairahawa existing domestic airport 5. UNIQUE PROPOSITION / SCARCITY • Tiger Palace Resort will be the first purpose-built integrated resort in South Asia • Nearest Indian casino gaming is Goa (>2,000km) Proposed Silver Heritage Welcome Counters 1 Source: UN, World Bank, Brookings Institution ENTITLEMENT OFFER │ SILVER HERITAGE GROUP Page 3
BUILDING TIGER PALACE - THE LESSONS LEARNT IDENTIFYING THE ISSUES Management of Silver Heritage has taken the delays and cost overruns very seriously • It has undertaken an extensive review of the project and its own internal supervisory practices • Key to that analysis were Independent reports by: • - Two independent project managers, Adam Titus and Tony Pieris, and - Grant Thornton ADDRESSING THE ISSUES Based on the independent reports and the Company’s own internal findings, key measures were implemented: • - Appointment of new project management team with international integrated resort development and project management experience, headed by Adam Titus - Implementation of new project management controls, at project level and reporting to central management - Renegotiation and deferral of payment terms with key contractors - Reconsideration of non-critical construction items - Increased on-site presence of senior management at Tiger Palace Resort - Setting of realistic contingencies, both financial and timing ENTITLEMENT OFFER │ SILVER HERITAGE GROUP Page 4
TIGER PALACE RESORT – APPROACHING COMPLETION ENTRANCE TO THE RESORT CASINO POWER & CHILLERS HOTEL PUBLIC AREAS LINKED WALKWAY HOTEL ROOMS HOTEL ARCADE ROOMS SWIMMING POOL GYM POOL BAR & GRILLE VIP VILLA VIP VILLA SPA Main Gaming Floor Tiger Palace Resort - Photo, May 2017 ENTITLEMENT OFFER │ SILVER HERITAGE GROUP Page 5
TIGER PALACE – CURRENT STATUS JUNE 2017 HOTEL PUBLIC AREAS HOTEL ROOMS - “AC1”, 50 ROOMS LINKED WALKWAY Hotel Rooms - Final Exterior Coat Hotel Block AC1 (50 Rooms) - Photo, May 2017 ENTITLEMENT OFFER │ SILVER HERITAGE GROUP Page 6
TIGER PALACE - CURRENT STATUS (JUNE 2017) HOSPITALITY On schedule to open in September 2017 and • confident of opening on time Project teams will move into the hotel from July for • live testing Integrated testing with full systems operational and • Hotel and Hospitality AC1 (Room Block) Internal defect rectification in August Spa Gym EXTERNALS AND UTILITIES AC4 Bar Pool Arcade All (4) diesel generators have been commissioned • AC3 and are pushing power to panels for electrical testing Pool Water well is connected and pumps have been • AC2 AC1 commissioned Raw and treated water tanks are complete and • system is ready Hotel & Hospitality - drone view Link Sewage treatment plant is on schedule to complete • by end of July Site work and entry road on schedule • Landscape and car park are ongoing and will be • ready for opening All utilities on schedule • Water supply Diesel generators Central plant ENTITLEMENT OFFER │ SILVER HERITAGE GROUP Page 7
TIGER PALACE - CURRENT STATUS (JUNE 2017) CASINO AND PUBLIC AREAS Scheduled during November 2017 • Surveillance system ordered and arrives in 4 • weeks by end July Cable trays being installed in the ceiling • CAFÉ & MICE / F&B RETAIL WEDDING CAR PARK 1 Raised floor first shipment will arrive in 2 weeks • MAIN FLOOR POWER ETC before mid-July P-COCHERE VIP GAMING Gaming Floor layout approved and casino • carpet onsite already EXTERNALS AND UTILITIES Drone view of Hotel Public Areas and Casino Walls, Floors, Ceilings mostly complete • Mechanical, Electrical, Plumbing complete but • not yet tested Fire sprinklers installed but not yet tested • Hotel Lobby Tower from Pool Area Hotel Lobby Tower, Car Park, and Retail ENTITLEMENT OFFER │ SILVER HERITAGE GROUP Page 8
SILVER HERITAGE OPERATIONS: TRADING UPDATE PHOENIX INTERNATIONAL CLUB, VIETNAM THE MILLIONAIRE’S CLUB AND CASINO, KATHMANDU • Located in Bac Ninh City, near Hanoi, Vietnam • Located in the Shangri-La Hotel, Kathmandu, Nepal • > 70 hotel rooms and suites in three separate buildings • 100 hotel rooms and suites in a 5-star hotel • 12 tables on the main gaming floor and 94 EGMs • 15 tables on the main gaming floor and 38 EGMs • Management Agreement (ESA) to 31 March 2025 • The Group owns the licence and manages the casino (SVH entitled to share of gross gaming revenue) • Lease of casino area, back of house and canteen until • Cash Return of 36% in 2016 on aggregate invested at least 2024 capital of US$11.1 million since opening • Cash Return of 17% in 2016 on an aggregate invested capital of US$3.2 million FY16 FY16 • US$4.0 million of Gross Profit • US$537,000 of Gross Profit 1Q17 1Q17 • US$1.3 million of Gross Profit • US$147,000 of Gross Profit • Up 53% vs. 1Q16 • Neutral vs. 1Q16 ENTITLEMENT OFFER │ SILVER HERITAGE GROUP Page 9
TIGER PALACE COST OVERRUN: WATERFALL ANALYSIS 60 2 50 13.8 11.8 40 USD Millions 30 20 40 40 40 10 0 Forecast Project Cost at IPO Revised Project Cost (US$53.8m) Capex Savings net of Interest Final Budgeted Project Cost @ May 25th 2017 Provision for Terms (US$51.8m) @ June 30th 2017 ENTITLEMENT OFFER │ SILVER HERITAGE GROUP Page 10
CAPEX SAVINGS NET OF INTEREST PROVISION • To further save project capital expenditure, the Project Management Team has identified the following savings, which have been approved by SVH Management and by the Board of Directors. • These items are non-critical either to player experience or to the expected 5-star rating for the hotel • Funding for these items will only be approved either from contingency or from a new “Expansion Capex” budget in the future, which will be funded from operating cashflow. Principal areas Savings Construction Verandah, Water Features, Paving, Basement HVAC US$425,000 Casino Fit-Out Doors, Shipping, Stone Cladding, Additional Kitchen Equipment, US$1,250,000 Fine Dining Owner Supplied Golf Carts, Arcade Equipment, Miscellaneous Equipment US$325,000 Equipment TOTAL US$2,000,000 ENTITLEMENT OFFER │ SILVER HERITAGE GROUP Page 11
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