GGRAsia – Hopeful pays US$40 mln to talk to NagaCorp on slot deal

Hopeful pays US$40 mln to talk to NagaCorp on slot deal

May 07, 2015 Newsdesk Latest News, Rest of Asia, Top of the deck

Cambodia casino operator NagaCorp Ltd says a would-be investor has agreed to pay a US$40 million just for the right to exclusive talks on running a slot machine operation at its flagship resort NagaWorld (pictured) in the capital Phnom Penh.

The outside party, CMC Phnom Penh Import Export Co Ltd (CMC), has agreed to pay the money “as a non-refundable negotiation fee,” NagaCorp said in a filing to the Hong Kong Stock Exchange on Wednesday.

CMC was described in the filing as a group of Chinese businessmen referred to NagaCorp by a construction contractor hired by the casino operator. The building firm was said in the filing to have had “a working relationship with the company [NagaCorp] for the past 20 years”.

NagaCorp has the exclusive right to operate a casino in Phnom Penh, and within a radius of 200 kilometres (124 miles) of the city.

A note on Thursday from Union Gaming Research Macau Ltd suggested that the negotiations would be “to replace the [about] 300 slot machines currently operated by Best Merit, whose concession is expiring later this year”.

“Ultimately, we expect the US$40 million negotiation fee to take the place of the typical upfront fee paid by a slot concessionaire to Naga,” said the note from analysts Grant Govertsen and Felicity Chiang. “Naga, similar to its previous deals, would then likely keep [about] 70 percent of the economics associated with the operation of these slot machines,” they added.

The Union Gaming team said it believes that the win per day on the slot machines under the new contract “could be materially higher … given that in all likelihood the machines will be new and running cashless gaming (relative to the fairly old machines being operated under the current contract)”.

The Hong Kong-listed casino operator reported that its unaudited gross gaming revenue (GGR) at its Phnom Penh resort increased by 48 percent year-on-year in the three months to March 31.

NagaCorp said in its latest filing that CMC “has expressed confidence in the investment climate in Cambodia, and in the prospects for an electronic gaming business to be operated within NagaWorld”.