VIPs growth powers ahead, legislation lags

Cambodia’s casino industry has seen another year of growth, helped by VIPs from China and growing tourism, though operators are still waiting for the publication of new legislation governing the industry.

The long-awaited gaming bill was submitted to the country’s cabinet in September. It is expected to set out a new tax regime, as well as formalizing a system for licensing; regulation of junkets; accounting and reporting procedures; greater disclosures and anti money laundering rules.

Ros Phearun, deputy director-general of the Finance Ministry’s financial industry department, told local media that the bill will help the government to manage the fast growing sector, but also to attract more large-scale foreign investment.

Operators have said the bill may spark a shake out of the country’s casinos, many of which are small and clustered along the borders to cater to either Vietnamese or Thai customers, who are banned from gambling at home. 

There is expected to be a minimum investment requirement of between $50 million to $100 million over ten years and this requirement, if confirmed, is likely to slash the number of casinos in the country by about two thirds to just 20 or so properties, a leading operator warned.

At present, Cambodia has issued 79 casino licenses.

IMF predicts steady growth

The International Monetary Fund has said the Cambodian economy is likely to grow 6.9 percent in 2017, slightly lower than the 7 percent recorded last year, fuelled by increased tourism, construction and garment exports. The IMF said it expects growth to remain robust in the next few years, though some economists have warned that renewed political uncertainty in the country make take its toll on growth.

Donaco plans buyback

Donaco International is implementing an on-market buyback for a maximum of up to 41.5 million shares, representing a maximum of 5 percent of the total. Managing Director and CEO Joey Lim says the buyback will complement the company’s dividend policy. “Our primary focus in assessing all potential uses of the company’s cash holdings is to ensure a strong return for shareholders. Buying the company’s shares at recent prices represents an excellent opportunity to generate strong returns. He says the buyback, scheduled to start Oct. 30th, will help boost earnings per share and have no impact on operations.

Tourism arrivals in 2017 have been strong, up 12 percent in the six months through to June, helped in particular by a 40 percent jump in visitation from China. The government is targeting two million China arrivals by 2020, a four-fold increase from current levels and in 2016 launched a China Ready policy to help foster trust between Cambodian businesses and Chinese visitors.

The program recognizes tourism establishments that have at least one Chinese speaking staff member and that have translated menus and web sites into Chinese.

Cambodia’s largest operator and the only one with a license to operate in the capital Phnom Penh has been a major beneficiary, reporting a 67 percent increase in VIP rollings in the nine months to end September to $11 billion. Mass table buy ins during the period were $566 million, up 24 percent, while electronic gaming machines bills in gained 16 percent to $1.3 billion. 

Naga opened its Naga 2 complex on Nov. 2, which is expected to drive further visitation to the resort. The complex, which is adjacent to the original property, adds 300 more gaming tables, as well as 500 electronic gaming machines, as well as shopping and entertainment facilities.

Conversion concern

During the year, the company’s founder and controlling shareholder, Tan Sr Dr. Chen Lip Keong, announced a plan to

gain full control of the company through exercising bond conversion rights. Under the plan, his stake would rise to more than 60 percent, from just under 40 percent at present. The deal has been challenged by hedge fund, Nine Masts Capital, as being unfair to minority shareholders.

Elsewhere, Australia-listed Donaco International’s Star Vegas property in Poipet, has had a less stellar year. The company saw a dip in revenue of 6.8 percent to $87.5 million in the 2017 fiscal year, due to subdued consumer sentiment and a weak economy in Thailand, which has been marking the official mourning period for King Bhumibol Adulyadej, who died in October last year.

In July, the company assumed full management control, and has been revamping its marketing strategy and changing the junket mix to boost revenue. Donaco bought Star Vegas in January 2015 for $360 million, although the Thai vendor agreed to stay on for a further two years to manage the property, offering a guaranteed minimum of $60 million in EBITDA during the period.

It recently announced plans to add approximately 100 gaming tables and said it was making ‘good progress’ in regards to marketing the property to a new group of international VIPs.

During the year, it signed a deal with international marketing agency Vivo Tower Ltd. to attract junkets from Macau, Hong Kong and Malaysia. Vivo Tower has already engaged Malaysian junket operator, Da Kim Global Group to bring in VIP customers starting from July 1.

Bavet City may also host a new resort. According to local media, Virtue Resources is planning a $200 million project to be known as Empire World City, consisting of a casino, hotel & resort, as well as a Water Show Arena.