Inside Asian Gaming

INSIDE ASIAN GAMING | January 2008 Slots & Tech 34 sidering all the benefits EGT offers. EGT also brings its property-owner partners its valuable insights about “what works for what market.” Mr Pisano himself is a fount of information, with 30 years experience in gaming technol- ogy, and having served as former head of Asia Pacific business development for IGT. EGT’s secured commitments to place 4,494 machines also exceeds the company’s market guidance, which was that “we would do 3,000 by the end of next year [2008], so we’re really blowing that out of the water,” remarks Mr Pisano. The commitments in- clude 2,364 placements in the Philippines at 10 venues, 1,230 in Cambodia at 10 venues, 400 in Vietnam at 2 venues and 500 aboard two cruise ships (300 aboard the MV Jupiter, which operates out of Hanoi, and 200 on Kolonwel, out of Hong Kong). By year-end 2007, EGT had already in- stalled 1,542 of those machines—again ex- ceeding market guidance. The units were installed across 12 venues, with 566 installed at 3 venues in the Philippines and 976 in- stalled at 9 venues in Cambodia. Early days All this had been achieved within a mere 70 days after Elixir Group’s takeover of US-listed VendingData Corporation (sub- sequently renamed Elixir Gaming Technolo- gies, Inc—ticket symbol EGT), which was completed on September 10. As Mr Pisano points out, it’s still “early days” for the com- pany, and EGT is now moving into India, Sri Lanka and Nepal. EGT’s new target is to have 5,500 ma- chines in operation by the end of 2008.“Our plan is to continue to roll out 1,000 per quar- ter,” says Mr Pisano, though from the com- pany’s performance so far, that target could well be exceeded. EGT will also start to roll out its own server-based slot machines in the first quar- ter of this year, and plans to unveil its first 100% server-based venue at a 200-machine venue in Manila, at a boutique hotel. When Inside Asian Gaming caught up with Mr Pisa- no in December, EGT was making some final changes to its prototype cabinets. The long case On investor website Seeking Alpha, Scott Stevens outlines “The Long Case for Elixir Gaming Technologies”, highlighting the potential of Asia, where huge demand for gaming is coupled with under-penetration of gaming devices, as shown in the tables below. According to Mr Stevens: “Adjusting for GDP differences across nations, it is still likely that the current addressable market is approximately 300,000 to 350,000 slot ma- chines. This does not include any new mar- kets which are likely to open such as: Laos, Nepal, India, Singapore, Malaysia, Taiwan, Sri Lanka, Papa New Guinea, Myanmar.” EGT’s revenue sharing arrangement is unique in Asia, and Mr Stevens outlines six factors which make it very difficult for any significant competitors to emerge: 1. Elixir Group has deep and well-estab- lished relationships across Asia. 2. Elixir Group is the largest purchas- er of slot machines in Asia (outside of Macau). EGT receives preferential pric- ing on their purchases of slot machines. EGT buyer status provides the company access to the best seller themed slot ma- chines such as Wheel of Fortune and Star Wars. The differentiated slot games cre- ate differentiation, which leads to higher then average win per day. 3. Elixir Group has also a very thorough understanding of regulatory, political and social issues associated with gaming venue development which is complicated and varied by country. For example, in the Philippines you must get approval from the City Council, Local Government, Phil- ippines Amusement and Gaming Corpo- ration (PAGCOR) and the Church to even establish a venue. 4. Melco (EGT’s parent company) has a very strong pedigree and is recognized throughout Asia for the success of their Mo- cha slot chain in Macau. 5. Elixir Group is also the only recog- nized operator that offers a full turnkey casino solution. 6. IGT and Aristocrat are unable to do a similar revenue share deal due to their U.S. gaming licenses. This is a key point as EGT buys both IGT and Aristocrat games for its gaming locations. People per Slot Machine in Asia Philippines 16,175 Cambodia 9,035 Vietnam 490,000 People per Slot Machine in Other Markets Australia 111 United Kingdom 223 United States 432 Source: World Count of Gaming Machines 2006, TNS consultant. Estimated Slot Potential of EGT’s Current Markets 2006* Potential** Philippines 5,299 182,155 Vietnam 170 170,525 Cambodia 1,662 27,992 Total 380,672 * Taylor Nelson Sofres April 2006 gaming research ** Assumptions based on 500 machines per capita