Escalating staff costs following expansion of the senior management team are likely to act as a brake on first-half net profit at Cambodian casino operator NagaCorp Ltd, says a note from Credit Suisse Group AG.
Hong Kong-listed NagaCorp reports its first half 2014 results on August 6.
“Despite the robust headline revenue growth of 21 percent in first half 2014, we expect net profit [at NagaCorp] to grow at only 8 percent year-on-year, decelerating from +24 percent year-on-year in 2013, on escalating staff cost amid expanding senior management team over the past six to nine months,” stated the note from Kenneth Fong, director of equity research at Credit Suisse (Hong Kong) Ltd, and his colleague Isis Wong.
Tim McNally, chairman of NagaCorp, in May told GGRAsia the company had been expanding table limits in the previous 12 months for junket partners willing to work on a revenue share basis with its Phnom Penh casino resort NagaWorld (pictured).
NagaCorp has a 70-year casino licence in Cambodia that will run until 2065, as well as a 41-year monopoly – expiring in 2035 – within a 200-kilometre (124-mile) radius of Phnom Penh.
Credit Suisse says some current site work at NagaWorld was likely to have had a short-term negative effect on the resort’s electronic games business.
“We estimate the EGM [electronic gaming machines] business (target mainly local market) to see slower growth in [the first half of 2014] due to the business interruption by construction work of NagaCity Walk (reduced footfall) and renovation of a new EGM hall,” stated the Credit Suisse note.
Union Gaming Research Macau Ltd said in a report on July 16 that it expected NagaCity Walk, a new retail mall being built next to the existing property, to be finished by year-end.
“While the [Naga]City Walk project is unlikely to be a large revenue driver in and of itself, we believe it will be a critical retail amenity component as it relates to an increasing number of Chinese customers,” stated Union Gaming.
NagaCorp has plans for a casino resort in Primorye, in the Russian Far East, its first foray outside Cambodia. Union Gaming said in its July report the company could break ground on the US$350 million project early next year. This would imply an early 2018 opening, added the research house.
