Cambodia casino operator NagaCorp Ltd says its gross gaming revenue (GGR) for the first quarter was nearly threefold that of the prior-year quarter, and it may need more mass-market tables in future, such is consumer demand for its gaming operations.
A Tuesday memo from brokerage Union Gaming Securities Asia Ltd noted nonetheless that VIP rolling chip turnover – another measure of casino operator performance – reported in NagaCorp’s selected unaudited highlights for the first quarter was nearly half that achieved in the fourth quarter, following the November opening of Naga 2 (pictured), a new gaming and hotel facility.
In the unaudited highlights of its operational performance for the three months to March 31, filed with the Hong Kong Stock Exchange on Tuesday, NagaCorp said overall GGR was up 180.6 percent year-on-year, to nearly US$243.2 million, compared to unaudited GGR of nearly US$86.7 million in the first quarter of 2017.
NagaCorp has an exclusive licence to operate casinos in Cambodia’s capital Phnom Penh and surroundings. It started operations with the NagaWorld property, which now links to Naga 2 via an underground shopping mall known as NagaCity Walk.
“It is observed that the month of March 2018 has seen noticeable increase of visitors compared to January 2018 and this has put significant pressure on the planned limited supply of the number of mass-market tables,” the operator said in its Tuesday filing. The document didn’t specify how many mass-market or VIP tables the group was operating at its two venues as of March 31, but said in its 2017 annual report, filed in mid-March, that as of December 31 last year NagaWorld had 384 gaming tables and 2,250 electronic gaming machines “in operation”. There was no specific breakdown for Naga 2 in the annual report, but at the time the property opened, management mentioned in an advisory note that Naga 2 would account for “at least” 300 gaming tables and “at least” 2,500 electronic gaming machines in the Cambodian operation.
The company currently pays a flat tax on gaming tables and gaming machines – rather than a tax on GGR – with the amounts of such taxes on gaming inventory typically adjusted upward annually.
The company said in guidance notes with Tuesday’s selected highlights of first-quarter operations, that the launch of Naga 2 – including a range of non-gaming facilities – had been an important factor in the improved performance, and had given the group a “competitive casino resort product comparable to integrated resorts in other established gaming destinations in the region”.
NagaCorp added: “There is minimal cannibalisation observed between the two properties, with most players at the existing NagaWorld property intact [still attending] or [attendance] increased and Naga 2 witnessing numerous new faces and customers never seen in the past.”
What the firm termed mass market “business” group wide – which it defined as mass-table buy-ins of chips and bills-in for electronic gaming machines – rose 32.8 percent year-on-year group-wide in the first quarter, to around US$779.1 million.
Rolling chip turnover in group VIP business rose 51.2 percent from the prior-year period, to US$5.64 billion, from US$3.73 billion.
The increase in VIP business volume was “due to the increase of business of both properties, being more pronounced in Naga 2, where [there was] customer demand for more tables and higher table limits,” said the firm.
It added, referring to Macau VIP gaming promoters – third-party entities that assist in the process of bringing high-value gamblers to that city’s casino market: “Other than a few other Macau-based operators who are already operating business with the group, another noted Macau-based operator, Suncity [Group] has signed an incentive agreement with the group, setting up a fixed-base business operation with fully-fledged office facilities, commencing business on March 1, 2018 and contributing in increased number of players and rolling.”
“VIP volume of US$5.6 billion was below the US$10.1 billion reported in fourth-quarter 2017 on the heels of the Naga 2 opening,” wrote Union Gaming’s Grant Govertsen.
He noted: We believe there are a few reasons for this: the first quarter is seasonally slower in Cambodia and actually has a negative impact from Chinese New Year (the opposite of Macau); and much of the play in fourth quarter 2017 was front-end loaded and hasn’t yet returned. However, we note that Suncity, Macau’s number one junket by a very wide margin, just began operating at Naga 2 and we should see materially better numbers on a sequential basis going forward. This will be boosted by the addition of another Macau junket during the second quarter.”
NagaCorp said that in the first quarter an “increasing number” of Southeast Asian players, “noticeably from Thailand,” had also been observed visiting its Phnom Penh properties, “in addition to the traditional large number of Malaysian and other customers” from the surrounding region.
The company stated that growth in the number of overseas visitors to Cambodia had also assisted the gaming business, including what the firm said was – citing data from sources it did not identify – a 91 percent year-on-year increase in January in the tally of visitors from mainland China, to 153,207. NagaCorp added – citing information from the country’s Ministry of Tourism – that China accounted for 26 percent of all visitors to Cambodia.
For full-year 2017, NagaCorp’s GGR jumped 85 percent year-on-year, and its profit rose 39 percent.
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"If the [Macau casino] concessions are put up for bid, there will also be a lot of giant Chinese companies, some having nothing to do with gaming, which would like to take over these enormously successful casinos”
Professor emeritus at Whittier Law School in California, in the United States, and a visiting professor at University of Macau