A second Asian casino operator has stated it will not take part in a request for proposal (RFP) process by the South Korean government for one of up to two new casino resort licences in that country.
NagaCorp Ltd said in a filing to the Hong Kong Stock Exchange released on Wednesday: “After analysis and deliberation, the company will not be participating in the RFP issued by the Ministry of Culture, Sports and Tourism for the development of an integrated resort (incorporating casinos that will be open to foreigners only) around the Incheon area.”
NagaCorp added: “The company is of the view that the expected economic returns of such an investment do not meet the company’s benchmark in evaluating return on investments and is therefore not in line with its policy of selective expansion.”
The firm further stated: “The company shall continue to evaluate and pursue other opportunities and jurisdictions in a selective manner.”
JP Morgan Securities (Asia Pacific) Ltd had mentioned in a July note that NagaCorp – which operates a large casino resort in Phnom Penh, the capital of Cambodia, and broke ground in May on a new resort near Vladivostok in the Russian Far East – had been named in South Korean media reports as one of 34 entities to take part in an initial “request for concept” for a so-called integrated resort licence in that country. NagaCorp’s chairman Tim McNally told GGRAsia at that time that the firm had “nothing to say at this point”.
GKL says ‘no’
Wednesday’s filing ruling NagaCorp out of the running for the RFP stage in the latest round of South Korea licensing comes only 24 hours after reports that Grand Korea Leisure Co Ltd (GKL), a state-controlled South Korean casino operator, would not submit an RFP for such a gaming licence for land it had earmarked for resort development near Incheon International Airport.
Under the RFP process being held by the Ministry, the country’s government is poised to issue up to two new licences for integrated resorts for foreign players-only, each requiring a capital commitment equal to US$850 million. That sum must include US$500 million from a foreign investment partner. The closing date for submissions is November 27.
Several analysts have highlighted the risk of any casino business model relying on Chinese gamblers – a major component of the recent business growth story in South Korea’s 16 foreigners-only casinos – during the current economic and policy adjustments that China is undergoing.
Deutsche Bank AG had mentioned in a note in January that the number of general Chinese tourists visiting South Korea in 2014 had risen 42 percent year-on-year to 6.1 million. Since then, the effects of China’s anti-graft campaign seem to have weighed on Chinese gamblers’ contribution to South Korea’s casino sector.
Thomas Y. Kwon, an analyst at Daiwa Securities Capital Markets Korea Co Ltd, said in a note on Tuesday following GKL’s third quarter results that the number of VIP gamblers from China visiting the firm’s three existing foreigners-only casinos was down by 44.3 percent year-on-year in the period.
NagaCorp’s chairman confirmed in an email to GGRAsia in October that his firm was “exploring the market” in the Republic of Cyprus, the Greek portion of that Mediterranean island, after the government there recently passed a casino control law.
NagaCorp said in a filing on October 2 that gross gaming revenue at its Cambodian gaming resort NagaWorld rose by 47 percent year-on-year to US$399.9 million in the nine months to September 30.
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Credit rating agency Fitch Ratings