Inside Asian Gaming

41 April 2013 | INSIDE ASIAN GAMING REGIONAL BRIEFS Mid-2015 Opening for Expanded Galaxy Macau Galaxy Entertainment Group expects to complete the next phase of the build- out of its Galaxy Macau megaresort by the middle of 2015. The publicly traded resort giant (HKSE: 0027) also announced a budget of HK$50 billion-$60 billion (US$6.4 billion-$7.7 billion) for phases 3 and 4 of the expansion at the resort, located at Macau’s booming Cotai resort district. Construction on these is expected to begin the end of this year or early in 2014, Galaxy said, and will encompass 1 million square meters. The company added that it will submit plans this year for Phase 3 and 4, which will be designed to target Macau’s lucrative “premium mass” players. In its analysis of the fourth-quarter and 2012 results, Union Gaming Research Macau says the expansion, once complete, will put Galaxy at No. 2 behind Sands China as the territory’s largest supplier of hotel and gaming inventory. “In the context of long-tailed mass-market growth, we remain believers that there is no substitute for lots of supply,” UGRM’s Grant Govertsen wrote. “Through the end of the decade, no other Macau casino concessionaire has a similarly sized developable land bank as Galaxy.” With a full year of results from flagship Galaxy Macau, 2012 was a banner year for GEG, with group adjusted EBITDA up 71% on a 38% increase in revenues to HK$56.7 billion. Net profit grew 146% to HK$7.4 billion. Galaxy Macau generated almost 60% of those revenues and delivered HK$6.5 billion in adjusted pre-tax earnings. On the Macau peninsula, the company’s StarWorld continues to be a prodigious profit driver, delivering a return on investment of 94% last year and contributing $3.2 billion in EBITDA, a 10% increase over 2011. “The year was defined by a continued shift in the market to the higher margin mass segment and solid VIP revenues at both our properties,”said GEG founder and Chairman Lui CheWoo.“GEG’s well- balanced portfolio of complementary properties is now effectively catering to a broad customer base that is focused on tourism, leisure and travel.” Visitation Up 24% in Cambodia in 2012 Visitation to Cambodia increased 24% last year, driven by an influx of tourists from Vietnam, Korea and China. More than 3.5 million arrivals were reported for 2012 by the country’s Ministry of Tourism, with Vietnamese accounting for 21.3%, followed by South Koreans and Chinese, with 411,491 and 333,894, respectively. Arrivals through Phnom Penh International Airport were up 11.1% for the year. Chinese visitors are expected to play an increasingly important role in Cambodia’s tourism mix, with the government forecasting their numbers to grow to 500,000 by 2015 and 1 million by 2020. Union Gaming Research Macau believes NagaWorld’s monopoly casino in the capital will draw an outsized share of the potential benefits. The investment firm estimates that Vietnamese are generating 40% of the property’s mass-market gaming revenue and Chinese about 10%. Hong Kong-listed NagaCorp (HKSE: 3918) reported that for the three months ended 31st March, main floor gaming table buy-ins amounted to US$93.63 million, up 22% year on year and electronic gaming machine cash-ins were US$248 million, up 14%. Junket VIP rolling volume, however, fell 11% to US$832 million. The average hotel occupancy rate also fell 14 percentage points to 70%. Ho Tram Wins Key Approval Asian Coast Development (Canada) has received approval from the government of Vietnam to amendments it requested to its investment certificate in a move that could contribute to getting the company’s delayed Ho Tram Strip resort open. ACDL Chief Executive Officer Lloyd Nathan called it a “landmark day” for the project. Located on the South China Sea coast about 70 miles fromHo Chi Minh City, Ho Tram has faced funding difficulties and regulatory and other problems, though its first phase is reported to be complete, with 541 rooms and suites, a casino for foreign passport holders, restaurants, shopping, a spa, swimming pools and beachfront and other leisure attractions. Banks had suspended a US$175 million credit facility contingent upon receiving an amendment to the investment certificate, and analysts believe the project may still need additional working capital and possibly more development funding. Last month, MGM Resorts International, which was to manage the property, pulled out without citing any reasons. “A key concern is the lack of a gaming operator at present,” Las Vegas-based Union Gaming wrote this week in a note to investors. “We don’t believe that the granting of the investment certificate will catalyze MGM to reconsider.” Investors include U.S.-listed casino operator Pinnacle Entertainment,whichcouldpossiblystepintoruntheresort,although Union Gaming cited “other challenges,” including “a prohibition on locals gambling, withholding tax on winnings in Vietnam, and the lack of a final Gaming Decree resulting in a default to more stringent regulatory standards.” In the meantime, ACDL says it is already constructing a second hotel tower of 559 rooms and an 18-hole golf course. NagaWorld in Phnom Penh, Cambodia Rendering of Galaxy Macau Phase 2 Updated image of construction at the golf course at the Ho Tram integrated resort project.