NagaCorp is aiming to tap into the Chinese market due to its long gaming tenure and monopoly

By MARK RAO

South-East Asia casino operators are betting on China’s rising affluent population that will flood to this corner of the world and raise their global profiles enough to rival the gambling capitals of Las Vegas and Macau.

Gaming operators are preparing to entice the estimated 200 million outbound trips from the world’s second-largest economy in 2020 alone to their gaming tables.

NagaCorp Ltd — the largest hotel and gaming operator in Cambodia — is one of the regional players that is preparing to welcome millions of players and high rollers to its establishment.

With a 70-year gaming licence and bordering the economic giant China to the north, NagaCorp manages and operates the largest integrated gaming and entertainment hotel complex in Cambodia — NagaWorld.

Its CEO and founder Tan Sri Dr Chen Lip Keong said the company should capitalise on the large amounts of spending expected from China by 2020.

“Cambodia is at the doorstep of China. Given the close geopolitical relationship between the two countries, we have an opportunity to squeeze a lot of consumer spending,” Chen told members of the press during NagaCorp’s soft launch of a second tower within its flagship NagaWorld property last week.

“We must make use of the great influx from China,” he added.

In the first eight months of this year, Cambodia received 3.5 million visitors — with Chinese tourists accounting for 21% of the total arrivals.

The Cambodian Ministry of Tourism is anticipating two million Chinese tourists to visit the country in 2020, or 28.6% of the expected seven million visitors.

NagaWorld, located in the Cambodian capital Phnom Penh, presently holds a gaming licence running up to 2065 and has exclusivity to be the sole integrated casino and hotel complex within a 200km radius over the next 18 years.

Chen said there was no better opportunity for NagaCorp to tap into the Chinese market due to its long gaming tenure and monopoly, as the Hong Kong-listed gaming operator wants to become a global hospitality player by 2035.

“Coupled with the One Belt, One Road trade initiative which will see China bringing in a lot of capital into the region, NagaCorp is well-placed to reap these benefits.”

The newly launched Naga2 — an imposing 110,105 sq m facility which costs US$369 million (RM1.56 billion) to develop — connects to the existing NagaWorld complex via an underground retail portion and is the start of the ambitious expansion plans that the company is undertaking.

“With the launch of Naga2, we now have a bigger balance sheet, our pockets are deeper and we are instilling greater confidence in investors,” Chen said.

Having already laid out the groundwork for a 2019 launch of a gaming resort in Vladivostok, Russia, NagaCorp is also eyeing opportunities in Mongolia, Kazakhstan and other regions, straddling dual economies with China.

Japan is also poised to overtake Macau in the gaming industry once the country issues its first integrated resort licence, with analysts predicting the market to be worth US$25 billion a year.

Hence, NagaCorp is keeping a close eye on the Japanese market.

But Chen said the company will balance between the amount of capital required to expand operations and how much gross gaming revenue can be generated.

With the new tower, NagaWorld now oversees 600 gaming tables, 5,000 electronic gaming machines and 1,700 hotel rooms, while boasting 4,061 sq m in retail space.

NagaCorp — the operator of the integrated casino and resort — was founded in 1995 after Malaysian native Chen came to Cambodia as part of Malaysia’s “Prosper Thy Neighbour” programme.

Ten years later, the company became the first gaming operator to be traded on the Hong Kong stock exchange in 2006 and captured a US$3.52 billion market capitalisation as of Oct 31 this year.

Despite this commendable growth, NagaCorp still carries the less favourable impression of operating in a third-world economy.

“In Cambodia, we have to be particularly careful with corporate governance,” Chen said.

“We need to be careful in how we manage the corporate governance issue because we operate in a country with strong perceptions.”

Investors’ wariness on gaming markets such as Cambodia limits the potential of NagaCorp’s VIP market, as the company is forced to operate with a more conservative table limit compared to other players in the gaming industry.

This is despite the fact that the segment contributed to 52%, or US$210.5 million, in group revenue for the first half of this year.

Chen said the company has recognised the need to further expand into the mass market and non-gaming markets to cushion against any draw- backs in the VIP segment.

The launch of Naga2, which sees a significant ramping up of retail and entertainment facilities, is aimed at addressing this need while setting the pace for its future expansion plans.