This post is lengthy.
I've just had a long chat with the Sungold president, Kim Hart, and I've reviewed the status of the company and the projects. My conclusion, as I said in an earlier post, is that the company is ready to make a strong move forward and upward. My opinions are for consideration by other shareholders. I make no apologies for believing that company management and its projects will succeed. I agree entirely with Sire that projects of this kind take time, and it is true that in the past some of our expectations have not been met in the time we hoped for. However, with the gaming development business being what it is, and given the nature of speculative stocks, there are moments when quantum shifts are likely, and my opinion is that this is such a moment. Others are welcome to their own opinions. My reasoning is as follows:
Firstly, Sungold has made significant corporate and management changes over the past year. The company is now listed in the U.S. under the NASD as a Canadian company. The management team has been beefed up. Kim Hart is now the President, and CEO. Hans Banziger is the Chairman of the board of directors. Don Harris, and Anne Kennedy have been added to the board. Tim Gladieux has been added as the Vice-President of Operations, and Anne Kennedy is the Director of Investor Relations. These people bring significant business skills and accomplishments, and together represent over 100 years of business experience managing business operations, real estate development, hospitality services, and major private and public financing. We already know that Don Harris, through TAC Investments has committed to purchasing 6 million shares at $4 U.S. when the Richmond Downs project is approved, and we know that he has had a successful career as the head of a $100 million U.S. real estate development company. Anne Kennedy has just purchased a private placement in the company of 50,000 shares at $2 U.S.. We will soon see that Tim Gladieux will be contributing to the company in a very strong way.
Additionally, the company is employing an army of specialized professionals and consultants in the U.S., Canada, and Korea; including architects, communications specialists, corporate financial advisors, accountants, traffic consultants, environmental consultants, structural engineers, government policy consultants, and an array of specialized lawyers. Detailed analytical reports have been commissioned from the Anderson Consulting Group and Marquette Advisors.
Mr. Hart has assembled a team that is capable of meeting the challenges that the next year will bring. In my interview with Kim it seemed to me that they have four major areas of objectives over the next year: 1/ the south-east Michigan casino project, 2/ Richmond Downs, 3/finding a financier/developer for the Korea projects, 4/ generating interest among investors, and elevating the market listing. Kim may disagree with this list, but I'm just a shareholder expressing my own opinions.
1/ Michigan: The less said the better, but it's close, very close; and when it comes, there'll be more soon to follow; literally, any day now. The preparations for what comes next are extraordinay. South Michigan is arguably the ripest unplucked casino development territory in the U.S.. The Band's ancestral homeland covers much of southern Michigan, and northern Ohio. This creates the possibility of a site within the middle of a very densely populated region which includes Detroit, Windsor, Toledo, and Cleveland. Just to get a sense of the potential revenue - the Ontario casino in Windsor is currently generating revenue of about $4 million per day. Although three new casinos are undergoing regulatory approval for Detroit, historical patterns of gaming utilization in places like Las Vegas and Atlantic City have shown that utilization increases faster than the increase in capacity. One study which Sungold commissioned from Marquette, has shown that even with the Windsor casino, three Detroit casinos, and the one projected by Sungold, the region will still be half as well-served as Atlantic City.
I am speculating that the deal that Sungold and the Band are negotiating with an operator and financier will be substantial. I believe they are currently considering terms that are better than we could have imagined a year ago. After Federal recognition, the Band will negotiate a compact with the Governor of Michigan, to be ratified by the legislature. Sungold has retained the services of a renowned gaming lawyer who works at a firm that has established itself as the leader in Michigan gaming law practice. They produce the newsletter, Michigan Gaming Law, which provides up to the minute gaming law developments in Detroit. It is free at (http://www.michigangaming.com). At present, the indications are that the Indian compacts will be prepared and presented to the Governor at the same time as tax arrangements for the Detroit casinos are submitted. There is a principle of equality involved, and the Bands should benefit from the speed at which the Detroit casinos are being approved.
There has been a large amount of quietness about the south Michigan project. As current shareholders know, the company has had to avoid any Tribal news during the B.A.R. recognition process period. That period is about to end. Once it ends, we will see a domino effect of pieces falling into place, which will be a very satisfying experience for everyone involved.
I probably don't need to remind anyone that the financial numbers involved in the south Michigan project will probably involve nine digits. I will add that the recent changes and additions to the Sungold management team mean that it will be particularly well equipped to carry this project through to completion.
2/ In Richmond B.C., some recent developments have propelled Richmond Downs a large step closer to reality. The plans for the facility illustrate what an enormous contribution it will make to the community and the province. The need for a world-class mile-plus horse track has been clear to many horsemen in B.C., and the horsemen's association has unanimously endorsed Richmond Downs as the replacement for the obsolete Hastings Park. Now the local politicians are realizing that their constituents want this development. It could be the single largest source of tax revenue for Richmond. It will provide thousands of jobs, a convention centre facility, and will function as a destination for tourists. While hotel construction in Richmond is increasing, overall new construction is declining. The current economic climate strongly favours Richmond Downs.
Equally important is that Sungold has been negotiating with the newly created Interport Development Corp. to lease land on which to place the grandstand and parking. The location is immediately adjacent to the site which the company has proposed the for race-track and stables. These negotiations may well be critical to a successful outcome. The creation of Interport Development Corp., with Chairman Steven Wu, was formally announced by David Collenette, Federal Minister of Transport, on Aug. 4, 1998. Interport is a private corporation with $100 million of financial backing from Asian sources which will develop 455 acres of Crown land administered by the Fraser River Harbour Commission, as a light industrial park. "This project, the largest to be opened in a decade in B.C., and the largest ever North of the Fraser River, will generate $500 million in capital investment over 15 years." Raymond Chan, MP for Richmond, and Secretary of State (Asia-Pacific) is also a committed supporter of Interport. This project is significant in part because it is occurring at a time when Asian investment in B.C. has been declining. The point of describing all this is to demonstrate that Interport is determined to develop this Crown land (which is actually a landfill site), and Richmond welcomes the development. Richmond Downs is an ideal use for this land. Sungold could be the first developer. Needless to say, the support of Interport will be very helpful. The Interport site will allow the placement of the purely agricultural uses (race-track and stables) on the ALR land.
There have been strong signs that the political will to support Richmond Downs is building. A major U.S. Thoroughbred Racing consulting firm has been commissioned to produce a substantial report on the future of horse racing in B.C. This report will be circulated to all the relevant persons within days. It is expected to be a detailed and authoritative report which suggests that the viability of Thoroughbred racing in B.C. depends on the construction of a facility such as Richmond Downs. My opinion, for what it's worth, is that the Richmond Downs project will soon have unstoppable momentum, and that we will be hearing good news about it in the near future.
3/ Korea: Mr. Hans Banziger is now responsible for the two Korean projects. These projects have reached a stage of development where they can essentially be sold to a major developer/financial group. The Anderson Group has completed a positive report on the Shindo Island project. That report constitutes a pre-feasibility study. The study concludes that the Shindo Island project, with its proximity to Seoul and the new Inchon Airport, which will be the largest in Asia, has tremendous potential and that the next phase of development will require a deep-pocketed investor. The Anderson Consulting Group in Korea is working with S.I.D.C. (Shindo Island Development Corp., in which Sungold is a 50% participant) and the Korean Government to attract major investors to the project. The company's work is essentially done, and the value of the project will increase as the airport and highway near completion. It is difficult to predict when the company will generate income from these projects, but it is anticipated that revenue may come in a variety of forms, including retained participation.
4/ Generating interest among investors, and elevating the market listing: With these projects ready to move into the next phase, it's time to inform more investors. Kim has already initiated an extensive series of media appearances in the U.S., particularly on radio business shows. He will also be talking with brokers and analysts, and appearing at conferences and in print. This effort is designed to elevate interest in the company to a level that is consistent with the quality and magnitude of the projects in development.
In time, possibly during next year, the company may want to go the markets for an equity underwriting to finance the development of Richmond Downs. The company plans to partner with an experienced racetrack operator in the management of Richmond Downs, and to retain equity ownership by the company shareholders. Sungold is committed to selecting an operator that is acceptable to all B.C. Thoroughbred industry stakeholders.
It follows from the above that the current market listing of the company is a temporary condition. Most shareholders know that the company has been completing the necessary 20F form for a foreign company to trade electronically through the NASD. (Sungold would already have been on the electronic board if it were an American company). I have seen a draft of this submission, and it could hardly be called a form. It is a volume. The document which is being submitted to the SEC is being prepared by U.S. lawyers who specialize in 20F forms and by company lawyers in Canada. It is a very detailed, condensed, and lengthy document which will have the benefit of forming the basis of the company's application for a NASDAQ listing next year.
In summary, as I said in an earlier post, I would suggest that no current shareholders sell at this moment unless they have to. Any current shareholders with money to spare might want to accumulate shares now before the ball starts rolling. There is no doubt that we will see increasing interest in this company, especially once the announcements begin. There will be many new U.S. investors watching for the right time. With Kim doing the marketing, I'd say our chance of gaining new investors are excellent.
The value of the stock will be whatever the market assigns to it. While this is still a speculative stock, there is greater inherent value in it now than a year or two ago. This is because the projects have been improved, developed, and moved closer to realization. It's also worth noting that the company has done a depository search and found that there are 2 million shares which have been sold short. The majority of Sungold shares are held in large blocks by very patient investors. There is a small supply of free trading shares. If the price begins rising, this can be an explosive mixture.
Because we are at the beginning of an ambitious one-year plan during which progressive stages of development will be announced, there will lots of opportunities to participate down the road. The reason for getting in now is that the shares have been basing at the $1 level and IMO, at this level, it's an excellent speculative buy, with minimal downside risk. |
