The operator of Club Cubic, Luk Hing Entertainment Group Holdings Ltd, has submitted an application proof to get a listing on the Growth Enterprise Market (GEM) of the Hong Kong Stock Exchange. The application proof, released on the GEM website on Monday, indicated that China Everbright Capital Ltd. is the company’s sole sponsor for the intended listing. However, the listing timetable, as well as share capital of the company, is redacted on the document. Club Cubic, opened in 2011, is located in the City of Dreams (COD) controlled by local gaming mogul Lawrence Ho Yau Lung. The clubbing venue occupies a total gross floor area of 25,780 square feet cross two levels inside the Cotai casino-resort property. According to the application proof, Luk Hing generated HK$9.4 million (US$1.7 million) net profit for the whole year of 2015, up 7 per cent from HK8.8 million one year ago. Meanwhile, its revenues totalled HK$125.6 million, a year-on-year increase of 4.3 per cent from 2014’s HK$120.3 million. The company said in the document that 77 per cent of its revenues for last year were earned from the sales of beverages, food and tobacco products, at HK$96.7 million, while other sources of income derived mainly from sponsorship, entrance fees, events rental and cloakroom. GEM serves to bridge the gap for companies which are unqualified to obtain a listing on the main board of the Exchange due to unfulfilled profitability or track requirements, to seek fund-raising opportunities. High reliance upon COD In fact, Club Cubic is the intended listing company’s only business. It also admitted in the application proof that its high reliance upon Club Cubic and COD may bring risks to its operations. ‘The Operation Agreement with COD will last for a term until 31 March 2020. Upon expiry, COD may not opt to renew the Operation Agreement, or may impose harsher or unfavourable terms and our Group will have to negotiate the terms of renewal,’ the company said in the application document. ‘If it is not renewed or terminated in advance due to whatever reason, our Group may not be able to obtain alternative premises on comparable terms on a timely basis, if at all. In such event, our Group will need to close down the club, and our business may be disrupted,’ it noted. Meanwhile, the listing seeker also alerted that the upcoming closure of its current show-in-residence, Taboo, on March 31 means the company would not receive any events rental income from COD afterwards. However, the operator claimed that it is planning to expand and diversify its businesses to reduce the high reliance. ‘We are in the process of preparing for the expansion of our Club Cubic and extending the club venue to a premise adjacent to the venue of Club Cubic. We expect to incur a capital expenditure of not less than HK$15 million for the expansion,’ it said, adding new clubs in the city are possible if new opportunities arise.
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