NagaWorld’s ‘s strategy as a low-end VIP destination, offering relatively high rolling commission rates while providing quality VIP player experience, continued to pay dividends in 2012 with revenues increasing by 24.6 per cent and profit by 22.9 per cent.
Whilst not matching its previous year’s profit growth of 109 per cent, the only licensed casino in Phnom Penh, the capital city of Cambodia, still managed to outstrip growth in Macau and Singapore. Whilst those two localities could be hit by new legislation coming out of China aimed at curbing the junket business, revenues at NagaWorld shouldn’t be affected.
Timothy McNally, NagaCorp Chairman said: “We’re obviously pleased with another record year. Profits exceeded $130m, up 23 per cent from the prior year. With regards to the news that the Chinese government is cracking down on junket operations, we do operate junket business as a market segment but on the same token we’re less reliant on them in terms of a revenue stream than a Macau casino. About 80 or 90 per cent of their revenue comes from the junket business. It’s less than 20 per cent of our business the majority of which comes from the mass market. We’re also not a China-centric business. Less than ten per cent of our revenue stream comes from our Chinese customers. We’re an IndoChina-based casino. We have 5,000 people coming into NagaWorld each day, 1.8m people a year; where are the coming from? Vietnam constitutes about 40 per cent of that, then there’s Korea and China, add to that 25 per cent of local Cambodians with passports and then we have splinters from Japan, Europe and the United States.”
The key to maintaining growth was twofold throughout 2012; segmenting the mass market and catering to VIP players. VIP gaming remains key to the project’s success although it is dependent on highrollers from Vietnam and Thail and not China, as is the case in Macau. A staggering $3.79bn was gambled at NagaWorld by 25,090 high rollers in 2012 with an average spend per head of $150,000 during each visit
Revenue from the venue’s 138 gaming tables increased by 21.1 per cent to $173m whilst slot revenue from 1,470 electronic gaming positions increased by 28 per cent $88m.he Chinese government is cracking down on junkets operations, we do operate junket business as a market segment but on the same token we’re less reliant on them in terms of a revenue stream than a Macau casino. About 80 or 90 per cent of their revenue comes from the junket business. It’s less than 20 per cent of our business the majority of which comes from the mass market. We’re also not a China-centric business. Less than ten per cent of our revenue stream comes from our Chinese customers. We’re an IndoChina-based casino. We have 5,000 people coming into NagaWorld each day, 1.8m people a year, where are the coming from? Vietnam constitutes about 40 per cent of that, then there’s Korea and China, add to that 25 per cent of local Cambodians with passports and then we have splinters from Japan, Europe and the United States.”
“It is imperative that the group continues to develop its premium mass players as maturity of the premium mass gaming areas will eventually reduce such volatility,” NagaCorp said in its financial review.
The gaming floor took $94.9min revenue from junkets and VIP gamblers, ‘a result of further market penetration into the group’s traditional VIP markets of Malaysia, Indonesia, Thailand, China and Vietnam.’
Targeting high-end, Vietnamese players has been key. Last year NagaWorld opened Saigon Palace, a premium mass gaming area dedicated to Vietnamese players. It also started a luxury bus service connecting Ho Chi Minh City and Phnom Penh in the summer. This year it will open another ‘casino cell’ with the Aristocrat Private Club VIP facility again for Vietnamese players.
“As well as ramping up the operations of Saigon Palace, we plan to open the Aristocrat Private Club, a high-rollers VIP club, in 2013, targeting quality, higher-end public floor players through higher table limits,” the operator said. “The junket business strategy of emphasising win-win formulas for both NagaWorld and junket operators, will be a key driver in the growth of the junket business.”
It is in discussions with several regional operators to move forward on this basis. To support the more discerning VIP players, NagaWorld had added five luxury gaming suites in January 2013, and ano
ther 2 targeted for opening later in 2013. “These suites provide individual private gaming space for higher-end junket players who seek ultimate comfort, convenience and privacy. These luxury VIP suites are the first of its kind in the region and will be a prelude to Naga2, which will feature 50 of such suites upon completion. To further upgrade NagaWorld’s VIP gaming facilities,” the company said.
It is planning a luxurious new Junkets and VIP gaming area, integrated with entertainment and restaurants on the rooftop of the existing Pool Block.
“To further develop the Junkets and VIP segment, we will emphasise on win-win formulas and turn the junket operators into casino owners so as to drive rollings and broaden its customer base,” the company said. “Such strategies will enable the group to increase its table limits, while limiting its exposure and managing volatility.”
The group’s strategy of segmentising the mass market based on player profiles and playing habits also led to incremental business volume in this segment. NagaRock, for example, a premium mass gaming area which opened in February 2012, targets the higher-end public floor players who look for a more r
elaxed and entertaining gaming environment, with higher table limits. NagaRock proved to be a successful casino cell concept and laid a strong foundation for the Group’s premium mass gaming business in 2012.
The proven success of the Rapid1 gaming area in 2011 also led to the launch of the Rapid2 gaming area in June 2012.
“The launch of rapid gaming areas is one of the strategies to further segmentise the mass gaming players by moving the lower end players from gaming tables to rapid gaming machines with lower limits, driving incremental business
volume in the overall mass gaming segment,” the company stated.
Work began in November on Naga2, a US$369m project to build another hotel and casino the street from the NagaWorld complex. Covering 97,620 sq. m. Set to debut in 2016, Naga2, will feature over 1,000 hotel rooms, 50 luxury VIP suites, up to 18,738 square metres of retail space, a 4,000 seating capacity MICE/ theatre facilities with additional gaming space for up to 300 tables and 500 gaming machines.
The entire cost of the project will be met by NagaCorp executive director Chen Lip Keong and not from NagaCorp’s own cash.
The future remains bright for NagaWorld. The group holds a casino licence granted for 70 years and has 41 years of exclusivity, expiring in 2035, within a 200-km radius of Phnom Penh, Cambodia, excluding the Cambodia-Vietnam border area, Bokor, Kirirom Mountains and Sihanoukvill. In ythe country as a whole, economic growth also remains strong. The World Bank (WB) maintains an economic growth forecast for Cambodia of 6.6 per cent for 2012 and 6.7 per cent for 2013. Tourist arrivals into Cambodia are tipped to reach 7m by 2020.
Union Gaming analyst Grant Govertsen said: “Despite the addition of supply, win per day metrics have actually increased, suggesting to us that NagaWorld still has plenty of runway remaining and that the point of saturation is likely not yet even a speck on the horizon. While we still consider mass market tables and slots to be the company’s bread and butter, and a major source of growth, we are becoming increasingly excited about the VIP segment, which should become a much more meaningful contributor of earnings in 2013 and beyond.”