The Deputy Chairman of Cambodian integrated resort operator NagaCorp says headwinds facing the Asian junket industry could prove to be positive for regional operators as business volumes start to return.
Speaking with Bloomberg TV following release of NagaCorp’s 2021 financial results on Wednesday, which saw the company sink to a US$147 million loss on a lengthy COVID-19 closure, Philip Lee said the company was planning to revert to a direct VIP model in the future.
And while this brings risks of its own, it could also prove beneficial in the long run.
“There are some views that it may be positive for the gaming industry because it effectively takes away the middle-man and encourages direct players to the casino properties,” he said.
“This of course will improve margins but we also have to be very careful of course in terms of the implications of credit risk by taking direct players. We’ll see how it plays out.”
Asked specifically about the decline of Suncity Group, which had operated two VIP Clubs at NagaWorld before the COVID-19 pandemic restricted international travel, Lee said, “We have definitely seen a drop off in the junket VIP segment [but] Suncity had already closed their operations at Naga in March of 2021, so it was way before this crackdown.
“As I said, perhaps this closure of junket business will not be such a negative thing because it will encourage direct players to the property. We have to be very careful how we extend credit and preferably check-in should be on a cash basis. We also need to make sure we do all our necessary AML checks on all players.
“Right now there are still travel restrictions so I think once the travel restrictions regionally are lifted we will see how that segment recovers.”
Lee also denied suggestions that a broader crackdown by mainland China on cross-border gambling created potential headaches for NagaCorp’s recovery prospects.
Investment bank Morgan Stanley wrote in a December note that NagaCorp had the greatest regional exposure to junket risks, with the VIP segment historically contributing 45% of the company’s EBITDA of which 25% is estimated to have come from Chinese VIPs.
“I think our business is quite unique in the industry,” Lee said. “We are not that reliant on visitation from China because our market really comprises of a very strong domestic market and via expat population from China as well as residents from Malaysia, Singapore and the rest of Asia. Really the Chinese visitation is not that critical to us in terms of our business.”
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