NagaCorp soars after profit jumps 83.5pc

PUBLISHED : Friday, 20 August, 2010, 12:00am
UPDATED : Friday, 20 August, 2010, 12:00am

Shares in Cambodian casino operator NagaCorp soared as much as 34 per cent yesterday after the company said net profit rose a better-than- expected 83.5 per cent in the first six months.

NagaCorp owns the 500-room NagaWorld casino hotel in central Phnom Penh and has a 40-year monopoly on operating a full-fledged casino with gaming tables in Cambodia's capital city.

Surging volumes on the casino's public mass-market gaming floor and a rapidly expanding slot machine area helped offset suppressed VIP gambling turnover. Analysts suspect some of NagaCorp's high-rolling Southeast Asian patrons had been testing the tables at Singapore's newly opened casinos.

First-half revenue rose a modest 6.6 per cent to US$67.8 million, but cost cutting and a focus on higher-margin mass-market play boosted earnings before interest, tax, depreciation and amortisation to US$30.09 million. This was up 77 per cent from a year earlier. Net profit rose to US$21.06 million from US$11.53 million.

The sharp rise in earnings came despite a dramatic fall-off in high-stakes play. VIP chip sales to high rollers brought in by junket agents fell 38 per cent to US$909.9 million. The casino won back a less-than-expected 2.2 per cent of those bets for US$20.2 million in VIP winnings, down 41 per cent from a year ago.

'We believe NagaWorld is likely (and temporarily) losing some VIP volume to Singapore,' Union Gaming Group analyst Bill Lerner wrote earlier this month in a research note. 'This is to be expected as new casinos are universally trialled upon opening.'

But the drop in high-stakes play was more than compensated for by booming mass market business. Revenue from the public casino floor rose 84 per cent to US$18.8 million as Nagacorp focused on marketing to Vietnamese and Thai players across the border and lured wealthy foreign-passport carrying Cambodians. Locals aren't permitted to gamble.

Slot revenue climbed 43 per cent to US$24.3 million as the casino added more than 300 new machines from a year ago. It now has 978, part of a continuing build-up.

The company is 63 per cent held by chief executive Chen Lip-keong. It announced a dividend of 5.54 HK cents per share, equal to 70 per cent of attributable profit for the period.

Shares in NagaCorp closed up 19.8 per cent yesterday following the results announcement at HK$1.15 apiece, a 12-month high.