NagaCorp expects VIP business to improve: Daiwa
Brokerage Daiwa Securities Group Inc said the management of Cambodian casino operator NagaCorp Ltd expects previous robust growth in its gambling business to persist this year.
It would be supported by an increase in the mass-market segment and an improvement in VIP margins, added the brokerage’s team, quoting members of the casino operator’s management. It followed conversations that people at the brokerage had with NagaCorp representatives at the Daiwa Consumer and Gaming Conference 2016 held from Tuesday to Thursday in Hong Kong.
“With the continued growth in headcount and average spend per player, [NagaCorp’s] management believes the robust growth in its mass business should continue to see sustainable growth in the near term,” said analysts Jamie Soo, Adrian Chan and Jennifer Wu, in a note on Wednesday.
NagaCorp’s management was also quoted saying it expects VIP margins to return to 2014 levels “of 36 percent to 37 percent, versus 26 percent to 27 percent in 2015”. That would be achieved by the firm by shifting profit sharing arrangements with its overseas junkets “back to 70 percent” after such profit sharing hit “circa 80 percent” in 2015, as NagaCorp sought to penetrate the mainland China market, stated Daiwa’s note.
NagaCorp – operator of the NagaWorld casino resort (pictured) in the Cambodian capital Phnom Penh – reported gross gaming revenue of US$153.8 million in the first quarter of 2016, up by 35 percent in year-on-year terms. The revenue improvement was helped by 65 percent growth in VIP rolling chip turnover to US$2.79 billion, the firm said in a filing to the Hong Kong Stock Exchange earlier this month.
The management of the casino operator is also upbeat on drawing more Chinese VIP players this year. “In 2016, [NagaCorp’s] management expects that flights from three more cities will be added … and are likely to consist of second tier cities in China,” said Daiwa’s note.
The additional flights are by Bassaka Air, a passenger airline based in Cambodia that leases the planes from NagaCorp. In January the airline initiated flights to the Chinese cities of Changsha and Xi’an.
The management of NagaCorp also said that NagaCity Walk – a shopping complex next to the firm’s casino resort – “is near completion and is expected to commence operations in August 2016,” according to Daiwa’s note.
The company’s management additionally said the extension of NagaWorld – known as Naga2 – should be operational in mid-2017. Naga2 will include more than 1,000 new hotel rooms and luxury suites, up to 300 gaming tables and 500 electronic gaming machines, according to regulatory filings.
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