Gaming revenue at NagaWorld in the Cambodian capital of Phnom Penh soared 17% year on year in 2014 to US$381.4 million, driven by Chinese VIPs, though profit dipped 3% to $136 million. NagaCorp, the Hong Kong-listed operator of NagaWorld, said that excluding a $15 million fee paid to an electronic gaming operator in 2013, NagaWorld’s profit last year would actually have risen 9%, while the rising costs of attracting Chinese VIPs also created a drag on profit.
According to a report in the Phnom Penh Post, NagaCorp said it is benefiting from high-rolling customers shying away from Macau, where VIP gaming revenue was down 10.9% in 2014. Furthermore, NagaWord’s gaming revenue is less dependent on Chinese VIPs than that of Macau, which has been reeling in the wake of Beijing’s ongoing corruption crackdown. As NagaCorp stated in its latest results announcement, NagaWorld benefited from a “relatively high proportion of revenue derived from the mass market, and the fact that most [of its] VIP revenue is derived from Southeast Asia”.
NagaCorp added: “The downturn in Macau offers the group further opportunities to further penetrate the Chinese gaming market in both the VIP and mass gaming segments, by being able to offer attractive commercial terms to junket operators and agents as a result of NagaWorld’s low cost structure.”
The VIP market comprised 47% of NagaWorld’s gaming revenue in 2014, up from 39% the year before, while VIP revenue rose 41% year on year to $188.2 million.
The profit margin on its VIP business declined, however, to 37% in 2014 from 40% the year before. That’s largely due to commissions NagaWorld pays third-party junket operators who bring in players from China, NagaCorp said. The profit margin in the mass-market gaming segment, meanwhile, stood at 96% last year.
Gaming analyst Michael Ting of CIMB Securities in Hong Kong said that regional competition, from the Philippines and elsewhere, for high-rolling Chinese clients was hurting NagaWorld’s VIP profit margin. “In order to bring in players from China, they have to incentivize junkets,” he said. “It’s hard for me to agree that their margins are going to stabilise – that’s just our view – due to regional competition.”
The drag on VIP profit margin contributed to a decline in the net profit margin from 40.7% in 2013 to 33.7% in 2014. Still, NagaWorld remains bullish on its future growth, saying it would sign on more Macau-based junkets.
NagaCorp launched its own charter airline, Bassaka Air, last year, in order to ferry in VIPs from China and Macau, although it has only flown domestically so far.
“The group is of the opinion that these promotional and operational strategies will bear fruit in the coming years as NagaWorld grows its market share in Asia,” the company said.
NagaCorp is also targeting 2017 for the completion of its new casino in the Russian port city of Vladivostok, and added that the NagaCity Walk addition, scheduled to open early next year, would “enhance the retail experience” for its customers.
