Int Ent Loss Widens to $62M, Gaming Revenue Up 61%

Kyle Kevin

iGaming Writer

Fact Checked

International Entertainment’s loss widened to HK$486.4 million for FY2026, driven by a non-cash charge on DigiPlus convertible notes. Gaming revenue surged 60.7% and gross profit jumped 66.4%, but a PHP5 billion Philippine tax dispute still hangs over the company.

International Entertainment Corporation has reported a FY2026 loss of HK$486.4 million, up 72.4% from the prior year’s HK$282.1 million. The Hong Kong-listed company filed its unaudited results on 28 August 2026. The headline number looks dire. The underlying business tells a different story. Gaming revenue surged 60.7% to HK$819.4 million. Gross profit jumped 66.4% to HK$454.6 million. Gross margin expanded 5 percentage points to 53.3%. The loss is almost entirely a non-cash accounting charge. IEC recorded a HK$424.9 million fair value loss on the HK$1.6 billion in convertible notes issued to DigiPlus Interactive. As IEC’s share price fluctuates, the liability value of those notes moves with it. A lower share price increases the liability. That creates a paper loss even though no cash leaves the company. Excluding that charge, IEC said its attributable loss narrowed by 78.2%. The operating turnaround is real. However, a PHP5 billion Philippine tax dispute still looms. The company has taken no provision, betting that legal advice will see it through. DigiPlus has completed both tranches of the convertible note subscription. If fully converted, it will hold 53.89% of IEC’s enlarged share capital. That makes DigiPlus the controlling shareholder of LaVie Resort & Casino Manila and the new online gaming platform.

The DigiPlus Notes and the Accounting Hit

IEC issued HK$1.6 billion in convertible notes to DigiPlus in two tranches. The first tranche closed in March 2026. The second tranche, worth HK$800 million, completed in June. DigiPlus paid a total of roughly HK$1.6 billion for the notes. The conversion price is HK$1.00 per share. At full conversion, DigiPlus receives 1.6 billion shares, representing 53.89% of IEC’s enlarged capital. The notes carry a 3% annual interest rate and mature in five years. The accounting treatment is what distorts the P&L. Under Hong Kong financial reporting standards, convertible notes are classified as financial liabilities. Their fair value must be remeasured at each reporting date. When IEC’s share price falls, the conversion option becomes more valuable to DigiPlus. That increases the liability on IEC’s balance sheet. The increase is recorded as a fair value loss through profit and loss. It is pure accounting. No cash changes hands. IEC said the situation “does not introduce any material uncertainty or liquidity risk to the group’s ability to continue as a going concern.” The company also noted that if the notes were reclassified from current liabilities, it would hold a “robust net current asset position” of HK$930.6 million. That is sufficient to cover all operating working capital and short-term obligations. DigiPlus has already benefited from the investment. In its Q2 2026 results, DigiPlus reported a fair value gain on the IEC notes that contributed to a 124% quarter-on-quarter jump in reported net income to PHP6.98 billion. The notes are a win for DigiPlus on both sides: they earn interest, and they appreciate in accounting value. For IEC, the notes provide liquidity but create volatility in reported earnings. Every quarter, the share price movement will drive a non-cash P&L swing. That makes IEC’s financials harder to read and harder to value.

Gaming Revenue Surges, Hotel Revenue Collapses

Group revenue rose 50.6% to HK$852.5 million for the 12 months to 30 June 2026. Gaming operations revenue jumped 60.7% to HK$819.4 million, representing 96.1% of the group total. The gaming segment itself swung from a loss of HK$234.9 million to a profit of HK$92.0 million. That is a genuine turnaround. The growth came from both land-based casino operations and gaming platform services provided to other authorised operators. Casino operations contributed HK$551.8 million. Platform service commissions added HK$125.2 million. Income from leasing gaming venues more than doubled to HK$142.5 million. Gross profit margin expanded to 53.3% from 48.3%, driven by higher-margin commission income. However, hotel revenue collapsed. It fell 41.2% to HK$33.1 million. IEC attributed the decline to the temporary closure of certain hotel rooms for renovation at LaVie Resort & Casino Manila. The renovation is part of the integrated resort’s upgrade programme, funded partly by the DigiPlus note proceeds. The hotel weakness is temporary. Once the renovation completes and rooms reopen, hotel revenue should normalise. The timing of the closure during the financial year was unfortunate. It depressed a revenue line that had been growing steadily. IEC said the macroeconomic environment in the Philippines also hurt. “Softer discretionary spending,” triggered by Middle East geopolitical tensions and persistent inflation, weighed on consumer behaviour. Despite that headwind, gaming revenue still surged 60.7%. That suggests the casino floor is resilient even when the broader economy softens. The gross profit jump of 66.4% is the most important number in the filing. It shows that revenue growth is translating into profit growth, not just volume. The margin expansion of 5 percentage points is significant for a business of this scale.

The PHP5 Billion Philippine Tax Dispute

As of 30 June 2026, Marina Square Properties Inc., an indirect wholly-owned subsidiary of IEC, faces tax disputes with the Philippine Bureau of Internal Revenue. The disputed amount is just under PHP5.01 billion. The disputes cover income tax and other taxes across six years within a period spanning 2008 to 2019. IEC has taken no accounting provision. The company said that, based on legal advice, “the most likely outcome is MSPI would have valid legal arguments to defend the above income and other tax disputes with no deficiency taxes liable.” That is a bold position. PHP5 billion is roughly US$90 million. It exceeds IEC’s annual gaming revenue. If the BIR prevails, the financial impact would be severe. Philippine tax disputes with gaming operators are not uncommon. The BIR has pursued multiple casino operators over VAT, income tax, and franchise tax assessments. In some cases, the courts have sided with operators. In others, the BIR has won. The 2008-2019 timeframe is long. It suggests the disputes involve historical assessments that have been working through the Philippine administrative and judicial system for years. IEC’s decision to take no provision is a gamble. If the legal advice is correct, the company avoids a hit to its balance sheet. If the advice is wrong, the provision will be much larger when it finally comes. The tax dispute is separate from the online gaming launch. However, it adds regulatory risk to a company that is already navigating a complex transition from land-based casino operator to hybrid online-offline platform.

Online Gaming and the DigiPlus Partnership

IEC’s subsidiary New Coast Leisure Inc. has been accredited by PAGCOR as a Gaming System Administrator. NCLI can operate electronic casino games, electronic bingo, online poker, and specialty games. The initial launch, targeted for late August or September 2026, will focus on electronic casino games with certified random number generators, traditional table games in electronic format, and arcade-style specialty games. The cooperation agreement with DigiPlus subsidiary Total Gamezone Xtreme allocates 3% of gross gaming revenue to NCLI and 97% to TGXI, before deductions. That is a lopsided split. However, IEC gets a digital platform it could never have built alone. DigiPlus gets a land-based anchor and a PAGCOR-licensed operator. The online gaming launch is the operational expression of the broader DigiPlus takeover. Once the notes convert, DigiPlus controls 53.89% of IEC. It will own LaVie Resort & Casino Manila and the online gaming platform. The Philippines online gaming market is crowded. DigiPlus already operates BingoPlus, ArenaPlus, and GameZone. Its platforms averaged 5.75 million monthly active users in Q2 2026. Adding IEC’s online offering gives DigiPlus another channel and another brand. For IEC, the partnership is survival. The company has been loss-making for years. The DigiPlus investment provides liquidity, technology, and a path to digital revenue. The FY2026 results show the land-based business is improving. The online business is the next chapter. Whether the combined entity can compete against entrenched Philippine digital operators remains to be seen. For ongoing coverage of Philippine gaming regulation and operator developments, AGBrief tracks the sector closely.

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