There may at least be a silver-plated if not solid silver lining to the cloud caused by the disappearance of Phnom Penh’s slot club market
Elixir Gaming Technologies, Inc. appears to have been the most fleet footed of the operators in the Cambodian capital’s once-thriving club scene. Seeing the way things were going politically following the accidental death of Phnom Penh’s police chief in November, by early January EGT had signed a deal with NagaCorp to operate slot machines on a revenue share basis in the latter’s NagaWorld Casino in Phnom Penh. Hong Kong-listed NagaCorp is insulated from all the political and regulatory turmoil recently surrounding Cambodia’s gambling industry, as it has an exclusive and currently unlimited 70-year casino licence within 200 kilometers of the capital.
The deal meant that by the time the final clamp down on Phnom Penh’s 70 slot clubs came in February, EGT was able to relocate equipment from its three slot clubs in the capital and mitigate potential losses.
EGT’s primary business is the placement of gaming machines on a revenue share model in three, four and five star resorts, hotels, and other venues across emerging gaming markets in the Asia Pacific region. In its results for the financial year ended 31st December 2008, EGT said it expected growth in the Philippines market in 2009 as well as expansion of capacity at NagaWorld would help to offset the closure of its own Phnom Penh slot clubs.
EGT added it has a total of six venues and 1,029 installed units currently in operation, comprised of five venues in the Philippines with a total of 829 installed units, plus the NagaWorld operation.
Total net revenue from machines on participation declined 7% from the third quarter of 2008 to US$1 million in Q4 ’08.
The company gave advance notice though of a positive trend for the first quarter of 2009. It says the net win per day per machine at its NagaWorld slot facility—branded Premier Club—rose 216.6%% from US$54 in February to US$171 in the first half of March. And that’s against a background of a 36.9% increase in the number of machines EGT had installed at NagaWorld since February.
“The customer response to the Premier Club is encouraging as net win per day per machine averaged US$54 during the month of February on an average machine count of 146 and ramped up to US$171 for the first 15 days in March on an average machine count of 182. Reflecting this demand, we recently expanded the number of machines on the floor at the Premier Club and currently have 200 machines in operation at this facility,” said Clarence Chung, Chairman and Chief Executive Officer in a commentary on the 2008 results.
Good news in the first quarter of 2009 however did not deflect general concern about the company’s medium to long term prospects in a recession hit market.
EGT is clawing its way toward break even, posting a much more respectable net loss of US$27.0 million, or US$0.23 per share for fiscal 2008, compared to a net loss of US$234.6 million or US$4.55 per share for fiscal 2007. However when the one-off effects of a US$214 million refinancing exercise in 2007 are discounted, then EGT’s net operational loss for 2008 is actually up slightly on 2007.
Revenues from gaming machines on participation were approximately US$1.0 million in Q4 ’08 compared to revenues of US$1.1 million in Q3 ’08 and US$0.3 million in Q4 ’07. EGT’s total revenues for Q4 ’08 were US$2.1 million compared to US$3.6 million in the third quarter of 2008 and US$2.6 million for the fourth quarter of 2007.
The company said the quarterly sequential decline in revenues reflected what it called “softness” in its legacy casino table games business. It added that in February this year that business had been sold off. This is understood to be a reference to a deal last month where EGT sold its intellectual property related to card shuffling and card deck checking equipment, including the RandomPlus Shuffler, the ShufflePro Shuffler and the DeckChecker, to Shuffle Master Inc.
EGT’s total revenues for fiscal 2008 increased to US$12.3 million from US$12.2 million in fiscal 2007 as incremental growth in revenues from gaming machines on participation and growth in non gaming operations offset declines in the legacy table game business.
Looking ahead to the rest of 2009, EGT said it was instituting further cost savings, including the closure of its Macau and U.S. offices and China manufacturing plant, a reduction in the size of its Hong Kong and Cambodia offices, and agreeing to voluntary reductions in salary for senior executives. It expected the measures to produce savings of US$3 million in Q2 2009 and US$2.5 million in Q3 ’09.
