Naga 2 Lamp-Up Leaves Macau Into the Dust

According to Union Gaming Securities Asia Ltd., the business of Nagakov's newest casino in Cambodia, Nagakov's Naga 2 is growing at a faster rate than casino resorts in Macau can manage. The securities firm says that Nagakov's supply of high-quality games has "fueled demand" and that Nagakov is generating "gaming volumes like Macao's representatives" at the level of pre-interest, taxable, depreciable and amortised (EBITDA), which is commonly seen among casino-grade 1 operators.

Hong Kong-listed Naga Corp posted a net profit of $180.1 million in the first half of its fiscal year ended June 30, up 19.6% from a year earlier. Total gaming revenue rose 84.6% to nearly $713.9 million.

Naga Corp Naga Corp reported volume of VIP gambling rolling chips rose 116.8% year-over-year to about $16.84 billion in the first half of 2018. During the reporting period, volume volumes rose 51% year-over-year to nearly $573.8 million.

Naga Corp. runs the NagaWorld Complex (pictured) and has the only license to run casinos in and around the capital Phnom Penh. It opened in December 2006 and started operating with the NagaWorld property, now called Naga1. The property is now connected to Naga2, an extension that opened in November last year.

These two buildings are now described as Naga World Complex and are connected through an underground shopping mall called Naga City Walk.

In a company update released on Wednesday, Union Gaming said much of Nagakov's revenue improvement "tells an enviable demand trend" in the Cambodian capital.

Announcing its first-half results, the company told the Hong Kong Stock Exchange that Naga2 had "significantly increased" the attractiveness, capacity, quality, range and reach of its facilities in Cambodia.

Union Gaming analyst Grant Govtsen called Naga2 a "game-changer." "In 2017, the company generated $260 million in EBITDA from operations (excluding slot licensing fees) representing the original NagaWorld's operations when Naga2 opened in November," he wrote.

"The company reported $233 million in EBITDA during the first half of 2018, and the steady increase in daily revenue for tables and slots during this period indicates that the response to the property has been impressive," Mr. Govtsen said. "This is repeated by our junket contact, which immediately took a bullish turn in bringing customers to Nagar as soon as Nagar 2 opened," he added.

Mr. Govtsen said there was absolutely no evidence of any customer or game position cannibalization between Naga1 and Naga2, in contrast to his experience in Macau. "A feature of the recent Macau IR opening is that not only game positions, but also legacy/sister properties tend to experience temporary cannibalization periods as customers rent to new properties," Mr. Govtsen noted.

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