Things are looking up for Entertainment Gaming Asia, formerly known as Elixir Gaming Technologies, with strong growth in slot participation revenue and plans for its own casino resort in CambodiaThursday, 09 September 2010
Entertainment Gaming Asia (EGT) currently has two major business lines. A gaming participation business where EGT earns a proportion of revenue generated by slot machines it operates at partners’ venues, and Dolphin RFID chips and plaques.
“The gaming participation business is now doing quite well. We currently have about 1,500 machines running, out of which about 900 are in the Philippines in various venues, and in Cambodia we have about 600 machines running in NagaWorld,” says CEO Clarence Chung.
The machines at NagaWorld are EGT’s big earners, achieving an average win per unit per day of over US$180 in the six months to May on a growing installed machine base. NagaWorld, which is located in the Cambodian capital of Phnom Penh, holds a monopoly licence to operate in and around the city until 2065. The machines in the Philippines earn closer to US$60 per unit per day. EGT’s share of revenue is 25% in Cambodia and averages approximately 20% in the Philippines.
In May, EGT announced an agreement to increase the total number of machines it operates at NagaWorld to 670 seats, from the previously agreed 640. EGT will place an additional 30 seats in order to complement and expand its VIP slot area located on NagaWorld’s casino lobby floor, established Pagcor Universal Club in the Philippines under a December 2009 contract. EGT is entitled to 100% of net win generated by the additional machines it is allowed to place until it recoups the agreed commitment fee.
Commenting on the May announcement to add 30 additional machine seats Mr Chung says: “We are pleased to work with our partner NagaWorld to continue to expand our jointly operated slot floor operations. With the addition of these 30 seats plus the remaining 50 seats under our December 2009 contract, our installed machine base at NagaWorld is expected to reach 670 seats during July of 2010 covering most of the currently available prime ground floor slot space at NagaWorld.”
|Sales of Dolphin gaming chips (RFID and non-RFID)|
|No. of Chips Manufactured||1,005,502||144,400||1,591,000|
|Sales (US$ '000s)||2,267||680||4,516|
|Gross Profit (US$ '000s)||453||116||1,965|
Dolphin Products based in Melbourne, Australia, is a wholly-owned EGT subsidiary specialising in the manufacture and sale of traditional and radio frequency identification (RFID) gaming chips and plaques. While Dolphin has already built a strong market presence in Macau and Australia, it is working hard to expand sales in international markets. Dolphin’s major customers include City of Dreams, Altira and Galaxy StarWorld in Macau, and Crown, Burswood and StarCity in Australia.
Dolphin was originally founded to make precision automotive components, principally for sale to Australian automakers. Although the Australian auto industry has declined substantially, Dolphin believes it is positioned to gain market share in the future.
Until recently, the bulk of EGT’s sales derived from its Dolphin subsidiary, but in the second half of 2009, gaming participation took over and contributed over 50% of revenue. “In addition to consolidating and growing our gaming participating business, we will try to control our own destiny by building, operating and owning our own casino,” reveals Mr Chung.
EGT announced at the end of May that it had been granted a casino licence by the Cambodian government for the project, dubbed Dreamworld Casino and Resort, in Takeo Province, near the Vietnam border. Dreamworld will include a casino and hotel on over seven acres (30,000 square meters) of land.
“For the last 18 months we have been diligent in our efforts to execute on our growth plans and successful in our operations in Cambodia and we believe we have proven ourselves. We have developed important local market relationships and the necessary understanding of the government and have established a strong brand name in the market. So, when we made our application for the licence, we got it,” reveals Mr Chung.
“The owner and operator approach allows us the potential for higher long-term incremental returns on our operations given the ability to collect 100% of the net win compared to approximately 20-25% as per our existing participation contracts. In addition, this extension of our gaming operations provides us the ability to leverage our established presence and goodwill in this market and increases our long-term control of our operations.”
The Dreamworld site is approximately 125 miles (200 kilometers) south of Phnom Penh, and is within three hours drive of several major cities in southern Vietnam with a total estimated population of approximately 17 million people. The project “is primarily geared to mass market players from the southern part of Vietnam and we will focus our marketing efforts in this region. We expect it to be the first venue of this size and quality in the area—there is one operating already, which is relatively small,” points out Mr Chung.
Dreamworld will also cater to players with dual passports in the greater Phnom Penh region, as local Cambodians are prohibited from gambling in their country. In addition to being located on National Highway No. 2 (the high-traffic road that connects Phnom Penh and the major cities in southern Vietnam), the property is positioned near a duty free trading zone that houses a large shopping facility and is within 30 minutes of a famous temple in Vietnam that attracts over one million visitors annually.
“We’re not going to build it all in one go. We are currently planning for three phases of development,” states Mr Chung. Phase one is expected to include around 150 electronic gaming machine seats and 20 table games housed on approximately 54,000 square feet (5,000 square meters) of casino floor space. “Depending on demand, we plan to add more gaming stations and hotel rooms in the subsequent phases.”
Capital expenditure for the first phase of Dreamworld, including the land and construction costs, are estimated to be approximately US$8-10 million. EGT anticipates it will be able to fund the project from cash on hand and projected cash flow from operations.
Mr Chung summed up by saying, “We are pleased with our progress and are eager to continue to serve the highpotential emerging gaming markets of Asia under a new name and expanded gaming business model.”