Naga2 ramp-up leaves Macau in the dust: Union Gaming

Jul 26, 2018 Newsdesk Latest News, Rest of Asia, Top of the deck  

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Business at the newest casino run by NagaCorp Ltd in Cambodia, Naga2, is ramping up at a faster pace than Macau’s casino resorts can manage, according to Union Gaming Securities Asia Ltd. The brokerage says the high-quality supply of gaming at Naga2 “has spurred demand”, and that NagaCorp is generating “Macau-flagship-like gaming volumes” at levels of earnings before interest, taxation, depreciation and amortisation (EBITDA) typically seen only among first-tier operators of casinos.

Hong Kong-listed NagaCorp made a net profit of US$180.1 million in its financial first half ended June 30, 19.6 percent more than a year earlier. Gross gaming revenue rose by 84.6 percent to nearly US$713.9 million.

NagaCorp reported VIP gambling rolling chip volume of approximately US$16.84 billion for the first half of 2018, up by 116.8 percent from the prior-year period. Mass volume rose by 51 percent year-on-year to nearly US$573.8 million in the reporting period.

NagaCorp operates the NagaWorld Complex (pictured) and has the only licence to operate casinos in and around the capital Phnom Penh. It started operations with the NagaWorld property, now referred to as Naga1, which opened in December 2006. That property now links to Naga2, an expansion that opened in November last year.

The two properties are now described as the NagaWorld Complex, and are connected via an underground shopping mall known as NagaCity Walk.

In a company update issued on Wednesday, Union Gaming said much of the improvement in NagaCorp’s bottom line “speaks to the enviable demand trends” in the Cambodian capital.

In announcing its first-half results, the company told the Hong Kong Stock Exchange that Naga2 “significantly increased the appeal, capacity, quality, range and reach of VIP, mass gaming and non-gaming offerings” of its facilities in Cambodia.

Union Gaming analyst Grant Govertsen called Naga2 “a game-changer”. “In 2017, the company generated US$260 million in EBITDA from operations (excluding slot licence fees), which primarily represented operations from the original NagaWorld, as Naga2 opened in November,” he wrote.

“That the company reported US$233 million in EBITDA during the first half of 2018 and that win per day for tables and slots has steadily increased throughout the period indicates the reception to the property has been impressive,” said Mr Govertsen. “This is echoed by our junket contacts, who instantly turned bullish on bringing customers to Naga as soon as Naga2 opened,” he added.

Mr Govertsen said there has been no evidence of cannibalisation of customers or gaming positions between Naga1 and Naga2, which is in contrast to the experience in Macau. “A hallmark of the recent Macau IR [integrated resort] openings is that the legacy/sister properties tend to experience a temporary period of cannibalisation as not only gaming positions, but customers too, are lent to the new property,” Mr Govertsen noted.

The note added: “We look for an announcement on Naga3 within the next 12 to 18 months.”

Union Gaming forecasts that annual growth in NagaCorp’s EBITDA will be “at least 10 percent for the next few years.”

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