Inside Asian Gaming

May 2013 | INSIDE ASIAN GAMING 9 COVER STORY C ambodia’s growing appeal as a regional destination should continue to pay sweet dividends for the NagaWorld casino monopoly in Phnom Penh. Visitation to the Southeast Asian nation increased 24% last year to 3.5 million, driven primarily by travelers from Vietnam, South Korea and China. Tourism receipts totaled US$2.21 billion in 2012 as average spend per capita, which has been on the rise for the better part of two decades, hit $663. The Ministry of Tourism is expecting 4 million visitors this year on the strength of forecasts calling for robust GDP growth across Indochina—7% annually through 2017, according to the International Monetary Fund—coupled with domestic infrastructure improvements, highlighted by a planned expansion of the international airport in Phnom Penh, and a broader reach into markets outside Southeast Asia, including more direct flight connections with mainland China. Actually, China is the country’s fastest-growing source of visitation (+35% YoY in 2012), and its contribution is expected to reach 500,000 by 2015 and 1 million by 2020. NagaWorld, the principal asset of Hong Kong-listed NagaCorp, enjoys an exclusive license within a 200-kilometer radius of the capital. The property is coming off a banner 2012 and looking forward to the opening of Naga2, which broke ground in November. Naga2 will add 1,033 hotel rooms, 200-300 table games, 50 VIP gaming rooms, 500 EGMs, entertainment and MICE facilities, and an underground shopping mall—the stuff of “a truly integrated gaming and entertainment destination,” as company Chairman Timothy McNally puts it. The property is already substantial by regional standards—660 hotel rooms, 1,700 electronic gaming machines and 170 live table games, 15 food & beverage outlets, a nightclub, a spa, 25,000 square meters of meeting space—and there are no statutory limits on gaming capacity. Revenues in 2012 were up 24.6% YoY to US$278.8. Pre- tax earnings were up 23% to $137.8 million for a sparkling 49% operating margin. Vietnamese players are the mainstay, accounting for an estimated 35-40% of main floor revenues. But VIP play, most of it Malaysian, is an increasingly important part of the mix, generating $95 million in revenue last year on a 17% increase in rolling chip volume. Five or so junkets are driving most of the volume, although the property has relationships with some 30 different operatives. Last year saw the opening of the company’s first sales offices in Ho Chi Minh City and Bangkok. Gambling generates more than 90% of revenues, but performance from the non- gaming side continues to improve. Room revenue increased 36%, food and beverage sales, 54%, entertainment and other revenues, 37%, a tribute to management’s success at up-selling the total offering to visitors with a bit more wallet. The role of the Vietnamese in driving these higher-margin segments has been significant enough to merit its own 200- room hotel wing and a dedicated gaming area for bigger cash players. Saigon Palace, it’s called. It opened earlier this year with Vietnamese-speaking dealers and Vietnamese food and music. Cambodia’s cheaper thrills are provided by 30 or so small casinos and slot parlors concentrated around the towns of Poipet and Pailin along the border with Thailand, where gambling is illegal, and in Bavet, bordering Vietnam, where casinos are off limits to locals. CIMB, an ASEAN-facing investment bank headquartered in Kuala Lumpur, estimates this frontier trade at 20- 30% of the total market, although no one knows for sure since it operates with little or no regulation. Entertainment Gaming Asia, a NagaWorld, the principal asset of Hong Kong-listed NagaCorp, enjoys an exclusive license within a 200-kilometer radius of Phnom Penh. Las Vegas Sun Hotel & Casino, Bavet Holiday Palace Resort & Casino, Poipet The ASEAN Model CAMBODIA