Inside Asian Gaming

INSIDE ASIAN GAMING | June 2013 32 T he latest earnings announcements from two gaming companies with significant Cambodia operations indicate softness in their businesses. It is not exactly clear why the numbers were off—no single factor was identified in disclosure statements and company executives would not comment—though sector analysts were not overly concerned. Nevertheless, the fact that both companies reported weakness in the same quarter raises questions about the state of the market and leaves investors waiting for more data to determine where it’s headed. Nasdaq-listed Entertainment Gaming Asia (EGT) reported 1Q net revenues from slot operations in Cambodia were down 16.6%year on year to US$3.24 million, while its win per unit per day in the country dropped 26%. Revenue fromEGT’s slot operations at NagaWorldwere $3.1 million, down $776,000 from the same period a year earlier, with daily average net win per machine there falling from $260 to $217. EGT’s revenues from casino operations dropped to $1.1 million from $1.2 million in the prior year while earnings before interest, taxes, depreciation and amortization fell 38.7% to $1.9 million (from $3.1 million). The company’s income from continuing operations swung from $935,000 in the first three months of 2012 to a loss of $288,000 in 1Q 2013. EGT declined our request for an interview, saying that it would prefer to speak once Dreamworld Poipet begins to impact results. The new $7.5 million slot hall had its soft opening at the very end of the first quarter on 28th March and its grand opening on 9th May. The site is on the Thai-Cambodia border and has about 300 gaming machines. In its earnings conference call and in public documents, EGT explained the results were partially the result of a second mourning period held 1st to 7th February for King Norodom Sihanouk, who died in Beijing on 15th October 2012. During that time, all places of entertainment were shut. The company’s SEC disclosures also mentioned a labor dispute at NagaWorld. At the end of February, an estimated 1,000 workers staged a strike demanding higher wages, the reinstatement of fired workers and the dismissal of a number of managers. EGT is highly dependent on NagaWorld. At the end of 2012, a full 46% of its electronic gaming machines were at Naga, delivering 76% of the company’s slot revenues and 43% of consolidated revenues. It is also important to note that NagaCorp increased the number of gamingmachines in its casino in 2012, from1,130 at the beginning of the year to 1,470 at the end. According to one analyst, this could be part of the reason for the drop in the average net win number on legacy machines such as those provided by EGT. While there is little official analyst coverage of EGT, those who observe the company peripherally note that the overall picture is a positive one. For example, Naga’s major ramp up in slot numbers seems to have come to an end, and it appears the dip in average win per machine may have been a temporary one. The company noted in a conference call to analysts that net win per machine at Naga had jumped back to $276 in April. According to Grant Govertsen, managing partner at Union Still figuring out the market—Dreamworld Pailin Hard Times Ahead? Cambodia’s two publicly listed gaming operators reported weak results in the first quarter. As Indochina correspondent Richard Meyer reports, it appears too soon to tell whether the quarter was a one-off or a trend