Cambodian casino operator NagaCorp Ltd. has inked an agreement with CMC Phnom Penh Import Export Co to establish an electronic gaming space on the ground floor of the Phnom Penh casino.
CMC “has expressed confidence in the investment climate in Cambodia, and in the prospects for an EGB to be operated within NagaWorld,” NagaCorp said in a statement. The company, owned by independent Chinese investors, will pay NagaCorp $40 million to set up the gaming area.
According to NagaCorp, the Phnom Penh resort is likely to see an influx of new visitors when its China Duty Free area at NagaCity Walk opens later this year. The company also sees potential “as a result of the anticipated numbers of tourist arrivals from China brought in by China International Travel Services Ltd, acting as the general sales agent for Bassaka Air,” the casino operator reported.
Union Gaming Group says the $40 million was more than it expected, offering hope that other concessions would also increase in value.
“We expect the $40 million negotiation fee to take the place of the typical upfront fee paid by a slot concessionaire to Naga,” Union Gaming said in a note to investors. “Naga, similar to its previous deals, would then likely keep around 70 percent of the economics associated with the operation of these slot machines. It is important to keep in mind that the amount, $40 million, is 33 percent higher than the latest comp that would have implied an upfront fee of only $30 million. In our note from 30 April 2015 ‘Still gaga for Naga,’ we highlighted that due to the superior location of the machines coming off contract we believed the fee paid to Naga could be in excess of $30 million. With a new benchmark established, we believe it is now even more likely that the fee associated with another 650 machines coming off contract in 2016 could generate a one-time fee for Naga in excess of $60 million that the previous comp would imply.’
