Gaming – Cambodia | NagaWorld VIP success may make it key challenger to Macau

NagaWorld, Phnom Penh’s only casino-hotel, is increasingly appearing as a key challenger to Macau as it reports growth in earnings that consistently outperform the MSAR’s integrated resorts.

While the Cambodia-based casino remains small compared with others in the region, it registered a 24 percent year-on-year increase in net profit in the first half of 2016 to USD125.2 million, with its gross gaming revenue (GGR) up 10 percent to $227 million.

The figures are still dwarfed by some of the Macau-based operators, which recorded a combined MOP107.8 billion ($13.5 billion) in GGR in the first half of the year. However, in the same period, Macau’s total diminished by 11.4 percent year-on-year.

The success of NagaWorld, run by Hong Kong-listed NagaCorp, has been in driving its focus on drawing VIP players from Southeast Asia and China.

Riding on the back of Chinese President Xi Jinping’s anti-corruption campaign, VIP gamblers from China pour into Phnom Penh’s single house of baccarat where they often find better offers than those they are accustomed to in Macau – even though the deals are promoted by many of the same junkets operating, or formerly operating, in the MSAR.

The upper echelons of Chinese society have sought gaming locations other than the ‘ill-reputed’ Macau since the anti-graft crackdown commenced in 2012. Company executives from NagaCorp openly note that their business growth is the direct consequence of the casino tapping into the now under-serviced market from the mainland.

Earlier this year, gaming analysts Union Gaming Securities Asia praised the company’s strong growth in this market segment. However, the analysts also cast doubts over whether the growth rate of the operator would continue at such a pace into this year’s second quarter.

Analyst doubts have done little to dent the expansion plans of NagaCorp. The operator is planning to open second complex, named “Naga 2”, which will feature an additional 200-300 gaming tables and more than 1,000 rooms. It is expected to open next year, with further prospects for a Naga 3 addition in the future, with even the possibility of a theme park.

The expansion is aided by the security afforded to NagaCorp’s by its 70-year casino monopoly in the Cambodian capital – an agreement arranged with the government that prohibits competitors from setting up shop in a 200-kilometer radius of the city center.

Still, lawmakers in Cambodia have stressed that the corporation’s monopoly is unacceptable and the possibility remains that a change in government might one day see the concession revoked.

In the meantime, Cambodia’s central location in Southeast Asia and its apparent ability to draw high-rollers from China is an enduring strategic advantage for the Phnom Penh casino.

Moreover, the country still has no law on gambling and no gross gaming revenue tax. Even if one is implemented next year, many analysts are confident that it is unlikely to exceed 4 percent, while others say it may even remain unchanged.