Vladivostok project drags NagaCorp to $1M loss in 1H24, despite increase in mass revenue

AGBrief Editorial

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August 28, 2024

Vladivostok project drags NagaCorp to $1M loss in 1H24, despite increase in mass revenue

Cambodian gaming operator NagaCorp saw its loss for the first half year fall well within expectations, totaling $963,000, still a strong reversal from the $82.97 million in profit recorded in 1H23.

The group had previously issued a profit warning, indicating an expected loss of between $6.9 million or a profit of $3.1 million – largely linked to an impairment over its gaming and resort project in Vladivostok, Russia.

According to results released on Tuesday, the group recorded an impairment of $89.11 million during the period on ‘property, plant and equipment and repayments for construction in relation to the Vladivostok Project’.

This was also within the range of $85 million to $95 million that the group had indicated it expected after an independent firm carried out an evaluation on the project.

Without the impairment, the group notes that it would have registered net profit of $88.1 million in 1H24.

Back in March of 2022, NagaCorp announced that it was suspending its Vladivostok project ‘indefinitely’ as it was ‘surrounded by various uncertainties’.

The project was envisioned to be an 11-storey four-star hotel with 279 rooms, a casino and a multipurpose concert hall with 2,000 seats and occupying nearly 55,000 square meters. The final planned complex was to occupy some 302,000 square meters and include 2,719 rooms and a water park.

Vladivostok, NagaCorp, Russia — *NagaCorp Vladivostok, Russia*

Mass play on the rise

Overall, the group saw a 12 percent rise in its gross gaming revenue (GGR) for 1H24, reaching $283.39 million, largely due to a strong acceleration in mass.

Mass public floor tables revenue was up 33 percent, to $130.61 million, however mass market EGM (electronic gaming machine) revenue was down by 5 percent, to $61.33 million.

The group attributes the overall increase in business volume to ‘the reasonably sized expatriate community, visitors from ASEAN and to some extent the recovery of Chinese visitors patronizing NagaWorld in search of entertainment’.

Gross profit for the mass market segment was $170.8 million, 74 percent of the group’s total.

NagaCorp operates the only integrated resort in Cambodia’s capital of Phnom Penh, NagaWorld.

At the property, the group notes that ‘the footfall on the Mass Market areas continue to see a gradual increase and recovery’.

VIP figures slow

Looking at the VIP segment, Premium VIP saw a 4.1 percent reduction in revenue, totaling $60.33 million, as rolling chip volumes fell by 11.7 percent yearly, to $1.8 billion. The rolling chip volumes contrast with strong gains of 46.5 percent and 141.7 percent in 2023 and 2022, respectively. The win rate rose to 4 percent, from 3.7 percent in 1H23.

Gross profit from Premium VIP was $45 million, 20 percent of the group’s total.

Referral VIP fared relatively better, with revenue up 17.6 percent, to $31.1 million, despite rolling chip volumes falling by 12.7 percent to $819.56 million. The win rate rose to 3.8 percent in 1H24 from 2.8 percent in 1H23.

Gross profit from Referral VIP was $7.5 million, just 3 percent of the group’s total.

Expectations

Looking ahead at the group’s $3.5 billion Naga 3 project in Phnom Penh, the group notes that the foundation and structural works for the basement floors ‘have been broadly completed’, while ‘clearing, cleaning and defect rectification works are on-going and are expected to be fully completed by the fourth quarter of 2024’.

Mid-last year, the group indicated that it was pushing back the opening date of Naga 3 by four years, to September of 2029.

Looking forward, the group notes that it is ‘optimistic about its long-term growth prospects and outlook with Cambodia’s ongoing economic recovery and political stability’.

It adds that it is ‘confident that the tourism sector will maintain its recovery momentum, driven by the return of international travel’ and that ‘Nagaworld […] will continue to benefit by attracting more visitors seeking entertainment and luxurious lifestyle offerings at competitive process and value’.

The group does not recommend the payment of an interim dividend for the period.

Previously the Bureau of Immigration had placed a 60 day deadline for foreign nationals working in POGOs to leave the country. This was halted by the nation’s Department of Justicce early this month, aiming to synchronize the government’s plan to phase out the controversial gaming industry by the end of the year.

Alejandro H. Tengco had previously given his support to legitimate operators in the offshore gaming space, however a ban ordered by the nation’s president, Ferdinand H. Marcos Jr. mandated that all POGO operations shutter by the end of the year due to “grave abuse […] to our system of laws”.

PAGCOR: foreign crime syndicates, not POGOs, are the real danger — Alejandro H. Tengco, CEO, PAGCOR

PAGCOR’s Chairman has predicted that the enforcement of the ban will cost PHP23 billion ($408 million) in revenue and up to 40,000 jobs.

The news about the work permit extension comes one day after PAGCOR’s Overseas Gaming License Department met with IGL (Internet Gaming Licensees, formerly known as POGOs) yesterday at PAGCOR’s Corporate Office in Pasay City.

The meeting included IGLs and authorized providers’ representatives, alongside representatives of the Department of Justice, Department of Labor and Employment and the Bureau of Immigration.

The reason for the meeting was indicated as ‘regarding the banning of Offshore Gaming in the Philippines’.

In a press release, SJM noted that the company’s recovery is accelerating, citing a 41.9 percent year-on-year increase in Macau’s gross gaming revenue (GGR) for 1H24. The Group’s GGR rose to nearly HK$4.62 million ($592 million), marking a substantial 50.3 percent year-on-year increase and reaching HK$13.79 billion ($1.77 billion).

SJM highlighted that, in the first half of 2024, non-rolling GGR for self-promoted casinos reached 135.4 percent of the non-rolling GGR from the same period in 2019. This indicates a strong recovery and reflects the company’s ongoing efforts to boost its non-rolling market segments.

Additionally, SJM believes these results show early positive outcomes from the “One Platform” initiative launched late last year. This new centralized platform is designed to better manage operating costs and enhance synergies across properties.

The improvement is also evident in market share. SJM reported that its GGR market share increased to 12.5 percent in 1H24, up from 11.8 percent in 1H23.

During this period, Grand Lisboa Palace (GLP) achieved a market share of 2.1 percent, while Grand Lisboa Macau reached 3.3 percent. These figures represent year-on-year gains of 0.8 percent and 0.4 percent, respectively.

This improvement aligns with the company’s goal of reaching a 5 percent market share in the coming years, although the progress made so far may not be highly significant.

Additionally, the “hotel, catering, retail, and leasing operations” segment reported a promising 35.7 percent yearly increase in revenue for 1H24. The average occupancy rate for the period was 94.2 percent, up from 85.9 percent for the six months ending in 2023.

Grand Lisboa Palace

SJM’s flagship property, Grand Lisboa Palace, saw gross revenue reach HK$2.95 billion ($379 million), driven by an increase in GGR to HK$2.32 billion ($298 million) and a strong non-gaming revenue contribution of HK$631 million ($81 million).

Adjusted Property EBITDA experienced a significant turnaround, totaling HK$192 million ($24.6 million), a notable recovery from a negative HK$292 million ($37.4 million) the previous year. This financial rebound highlights a strong recovery, improved revenue streams, and better operational efficiency across GLP’s offerings. The occupancy rate for 1H24 surged to 94.8 percent, up from 83.9 percent in 1H23.

Grand Lisboa and self-promoted casinos

Grand Lisboa, located in the Macau Peninsula, reported gross revenue of HK$3.8 billion ($487 million) for the period. This was driven by a significant increase in GGR, which reached HK$3.66 billion ($469 million), reflecting a 61.5 percent year-on-year rise.

Non-gaming revenue also showed stable growth at HK$140 million ($18 million). Additionally, Grand Lisboa’s Adjusted Property EBITDA amounted to HK$1.01 billion ($129.5 million), recovering from HK$473 million ($60.6 million) the previous year.

This strong performance underscores the property’s resilience and ongoing popularity. The hotel’s occupancy rate for 1H24 improved to 98.5 percent, up from 87.8 percent in 1H23.

Other self-promoted casinos also performed well, with non-rolling GGR at 103.9 percent of pre-pandemic levels in 2019.

PH President says investigation into POGO mayor’s flight from country “almost finished”

Philippines

AGBrief Editorial

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August 27, 2024

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PH President says investigation into POGO mayor’s flight from country “almost finished”

The Philippine President Ferdinand R. Marcos Jr. has again weighed in on the case of dismissed Bamban, Tarlac mayor Alice Guo, stating that the investigation into her departure from the country is “almost finished”.

According to the nation’s news agency, President Ferdinand R. Marcos Jr. indicated he had a “very good idea” of who had helped the “POGO Mayor” leave the Philippines, indicating they would be identified “and we will act very quickly”.

Individuals to be held accountable include immigration personnel, while indicating that the final part of the investigation involved seeing whether it was individuals or a syndicate who had helped Guo in her departure.

Guo was reportedly most recently in Indonesia, as of August 18^th. A report by the nation’s Bureau of Immigration, cited by Philstar, indicates that Guo is still in Indonesia but has plans to go to the Golden Triangle. A BI official indicated that “mayor Alice Guo has not yet made an attempt to cross the border again, since she last entered (Indonesia).”

A Presidential Anti-Organized Crime Commission (PAOCC) representative had previously indicated Guo’s target of the Golden Triangle was due to reported business and gambling interests in Cambodia.

Meanwhile, Shiela Guo told senators on Tuesday that she, her brother and her sister had left the country by boat, leaving Bamban by van then transferring on various ships to reach Sabah, Malaysia.

Shiela Guo, Philippines, President, Alice Guo, Pogo Mayor

The National Bureau of Investigation (NBI) says the three Guo siblings – Alice, Shiela and Wesley did not leave by any public port.

Given the testimonies, Senate Deputy Minority Leader Risa Hontiveros, presiding over the inquiry, has called for more hearings.

Meanwhile, the Commission of Elections (Comelec) has granted a request by Alice Guo for a 10-day extension of a deadline for a counter-affidavit for a complaint against her, noting that “if they request for another extension, I don’t think it is proper anymore. It is enough that they were given at least one chance”.

Comelec Chairperson George Erwin Garcia, however questioned whether her counter-affidavit would have a valid signature, sworn before a public notary – noting it would not be accepted if she fails to appear and have the document notarized.

The case originates from claims Guo falsely represented herself on her certificate of candidacy for the May 2022 polls.

Alice Guo is facing serious criminal charges, including violations of the Anti-Trafficking in Persons Act. Further cases are being pursued related to her alleged involvement in POGO operations.

AGT’s Asia-Pacific segment remained afloat amid competitive market conditions, with revenue dropping by 10 percent to AU$19.1 million ($12.9 million) in 1H24 compared to AU$21.2 million ($14.3 million) in the prior corresponding period. Nevertheless, the company saw improved profitability in this region, with segment profit rising to AU$1.6 million ($1.1 million) from a loss of AU$0.2 million ($0.14 million) in 1H23. AGT attributes this improvement to cost containment measures and better gross margins.

Latin America and Europe struggled in 1H24, with revenue down 36 percent to AU$29.3 million ($19.8 million), compared to the same period in 2023. This was largely due to changes in import regulations in Argentina and Mexico, which hindered sales.

In contrast, North America fared better, maintaining relatively stable revenue at AU$67.9 million ($45.9 million), down slightly from AU$68.5 million ($46.3 million) in the first half of 2023. The strong performance of high-denomination games and the introduction of the A-Star Raptor cabinet in the US market have bolstered the region’s performance.

Ainsworth also reported that recurring revenues from historical horse racing (HHR) and connected fees increased to AU$48.9 million ($33 million), a 3 percent increase from the previous year, demonstrating the stability of its recurring revenue streams.

Despite the challenges, AGT is optimistic about future growth. The company continues to develop and release new gaming products, which are expected to drive further revenue opportunities in the second half of 2024.

Chairman Danny Gladstone expressed confidence in AGT’s investment strategy, stating, “These investments are expected to further establish the necessary foundations to enable the development and release of new and innovative products to achieve improvements in the Group’s financial results.”

In addition to new product launches, AGT has secured an extension of its exclusivity agreement for VLT (video lottery terminal) products in Montana for another three years, which will provide further revenue opportunities through cabinet and software purchases in the latter half of the year.

AGT’s online segment reported revenue of AU$5.1 million ($3.4 million), down from AU$8.4 million ($5.7 million) in H1 2023. This drop reflected the termination of the company’s exclusivity agreement with GameAccount Network (GAN) in March 2024. However, AGT remains committed to expanding its online presence through direct integrations with operators in North America and Latin America.

The company’s focus on research and development (R&D) continues to grow, with expenses up by 18 percent compared to the previous year. R&D accounted for 21 percent of AGT’s total revenue in H1 2024, with the company stating it continues to innovate in order to remain competitive in the global gaming market.

“As we secure the remaining approvals of the A-Star Raptor across additional jurisdictions, in conjunction with the progressive release of newly developed gaming titles, we expect the second half to provide increased revenue opportunities”, CEO Harald Neumann added.

A risk assessment conducted by the council in March 2020 highlighted these vulnerabilities, leading to the conclusion that a comprehensive ban on POGOs could mitigate these risks. The council expressed optimism that this ban would decrease the prevalence of money laundering within the gaming industry.

The Philippines has been identified as one of the top five countries in Southeast Asia which experienced a significant increase in money laundering activities between 2018 and 2023.

According to data from Moody’s, money laundering incidents in the country surged by 45 percent from 2022 to 2023. The AMLC’s recent efforts to curb these activities through the POGO ban mark a critical step in addressing this trend.

While the POGO ban is expected to reduce money laundering risks, the AMLC clarified that the remaining concerns highlighted by the Financial Action Task Force (FATF) are unrelated to POGOs. Instead, these concerns focus on mitigating risks associated with junket operations in casinos. Junkets, often involving high rollers who travel to casinos for gambling, have been identified as another potential avenue for money laundering.

The FATF, which has kept the Philippines on its “grey list” of jurisdictions under increased monitoring for money laundering risks for three consecutive years, noted that the country has addressed 15 out of its 18 recommended action items. However, one of the remaining items involves demonstrating that anti-money laundering and counter-financing of terrorism (AML/CFT) controls are effectively mitigating risks within casino junket operations.

To further combat money laundering, the AMLC underscored the importance of implementing stringent AML/CFT controls in the gaming sector. These measures include fit and proper tests on junket operators, enhanced customer due diligence, and regular monitoring of transactions related to junket operations.

The council also urged gaming regulators to enhance their compliance and enforcement efforts to ensure robust anti-money laundering practices.

Macau retailer DFS lays off 80 due to rapid market changes

Macau

Viviana Chan

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August 27, 2024

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Macau retailer DFS lays off 80 due to rapid market changes

China’s economic slowdown continues to weigh on Macau’s recovery. Luxury retailer DFS Group has recently laid off approximately 80 frontline sales employees in Macau. This marks the first significant layoff action since the company established its presence in the region in 2008.

According to Allin Media, DFS Group stated that, given the rapid changes in Macau’s luxury retail market, the company made the difficult decision to reduce its workforce by 5 percent. This decision contrasts with current Macau visitor arrival numbers and gross gaming revenue (GGR).

DFS has deep engagement with Macau’s integrated resorts located in the Cotai area, offering luxury brands, beauty products, and more.

In June, DFS had already implemented an unpaid leave plan across its Macau branches, requesting that employees take at least six days of unpaid leave between July and August, a period typically considered the high season for tourism in Macau.

Meanwhile, according to Macau’s gaming regulator, during the first seven months of the year, Macau’s gross gaming revenue reached MOP132.34 billion ($16.44 billion), marking a yearly increase of 36.7 percent.

In addition, on August 24th Macau welcomed a total of 166,562 tourists, representing a 7.5 percent increase compared to the highest single-day total during the same period in 2019.

The decision to cut expenses in June by DFS follows a sharp decline in business, with revenue reportedly falling by nearly 40 percent compared to last year and pre-COVID levels. Additionally, the salaries of frontline employees have been significantly reduced by almost 50 percent, partly due to lower sales volumes of cosmetic products since the latter half of the previous year.

While the companies have agreed to the government’s stipulation that casinos occupy only 10-20 percent of the complex space but contribute 80 percent of total revenue, they are calling for more flexibility in choosing venues. Thai law currently limits entertainment complexes to five areas in the country.

Good morning. Taxation and now, possibly, representation. India’s Supreme Court is set to rule on the Goods and Services Tax (GST), which has caused a major blow to the nation’s gaming industry – both land-based and online, and put the future of many companies in question due to massive backlogged taxes. Meanwhile, in Thailand, a recent official study now under evaluation by authorities predicts that some 90 percent of casino patrons would be locals. This could mean as many as 37 million Thai residents potentially frequenting a future integrated resort’s casino.

What you need to know

Indian gaming industry waiting anxiously for the Supreme Court decision on the Goods and Services Tax (GST): finance consultant.
Thailand’s Finance Ministry study predicts 90% of casino patrons would be locals, with up to 37 million Thai residents potentially visiting.

On the radar

Ciarán Carruthers to step down as Crown Resorts CEO: reports.
Vietnam extends the casino trial period for local patrons until year-end.
Macau’s top judge resigns from post, likely preparing for Chief Executive bid.
Delta Corp reports sharp drop in revenue and profits for 2Q24.
Century Entertainment Chair keeps company afloat, focused on Cambodia.
LET Group expecting loss in 1H24, despite improvements in Summit Ascent.
Macau’s gambling disorder cases see a significant increase in 1H24.

AGB Intelligence

INDIA

Stifled gaming industry awaiting GST decision

Gaming companies in India, including traditional land-based operations, are eagerly awaiting a Supreme Court Decision on the Goods and Services Tax (GST), which many deem to be stifling the sector. The extreme amount of the backlogged taxes has threatened not only the growth of companies, but their very survival, notes a financial consultant. However, the situation is unlikely to worsen and could potentially improve, depending on the ruling.

Corporate Spotlight

1xBet: The most popular gambling games and slots in Asia

For global betting company 1xBet, Asia is a key market for several reasons. This is why 1xBet pays special attention to the Asian market and actively promotes its sports betting platform and the most popular gambling games on the continent.

Industry Updates

Pragmatic Play fires up big wins In Forging Wilds.
Games Global closes out August with a burst of new games.

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