Twenty years ago, NagaCorp started its gaming business on a barge in Phnom Penh. Imitating the progress of life on earth, NagaCorp came onshore in 2003 and began evolving into more complex forms under its NagaWorld brand, as reported in this month’s Inside Asian Gaming. The company has a monopoly on casino gaming within a 200 kilometer (120 mile) radius of Cambodia’s booming capital.
In the early days, NagaWorld relied on mainly junkets from Malaysia and Singapore, essentially copying the business plan of Genting Group’s Highlands resort, now known as Resorts World Genting, outside Kuala Lumpur. NagaWorld offered commissions up to 1.75% (compared with less than 1% in Macau back then) and VIP buy-ins as low as $15,000. VIP tables had a $40,000 maximum bet, or maximum differential between banker and player bets in baccarat. “We called ourselves a blue collar casino,” NagaCorp chairman Timothy McNally recalls. “We couldn’t afford volatility, so we focused on low end junkets.”
NagaWorld has grown from its river barge roots as is still growing. Naga2 construction cranes are in the background. (Photo credit: Muhammad Cohen)
NagaWorld has grown from its river barge roots as is still expanding. Naga2 construction cranes are in the background. (Photo credit: Muhammad Cohen)
A 2006 Hong Kong stock market listing and completion of NagaWorld’s current hotel and entertainment wings in 2008 enabled the company to revamp its strategy and build mass market business to reduce volatility. Vietnam was an initial target, with a marketing office in Ho Chi Minh City, about five hours from Phnom Penh by road. Vietnamese players constituted as much as 40% of casino visitors then though now they account for only about 10-15% of mass gaming revenue, NagaCorp executives say. Remaining revenue splits evenly between visitors from the rest of Asia and resident expatriates plus Cambodians holding foreign passports. NagaWorld later opened a marketing office in Bangkok, a one hour flight away. As part of its strategic refocus, the company also cut back on credit to junkets in 2009, as the global recession bit across Asia, and began developing direct relationships with VIPs.
ForbesBrandVoice
?
The transition to mass benefited as Cambodian authorities shut down slot machine parlors in Phnom Penh that operated thousands of machines in early 2009; NagaWorld’s slot revenue increased from $3.1 million in 2008 to $34.3 million in 2009. NagaWorld debuted its first live multigame terminals in 2011. This month, it got offered a $40 million “negotiating fee” from a prospective contractor to operate 300 of the some 1,700 electronic gaming machine positions on NagaWorld’s casino floor. These deals typically give the casino 70% of winnings while the so-called revenue share operator supplies the machines, maintains them and often staffs their area.

NagaRock, a premium mass area on second floor also opened in 2009 with 16 tables, 240 machines, a bar, and performance lounge serving food and beverages, part of what the company calls its casino cell strategy. A year later, Saigon Palace opened with 10 tables and 250 slots. The ground floor has a main gaming floor with 40 tables and 675 machines and the China Garden casino cell with 19 tables and 288 slots, a pagoda, wooden bridges and live plants. Upstairs, the sports book area also houses a pair of poker tables. Along with 700 guest rooms, NagaWorld has 18 food and beverage choices, including what may be the best breakfast buffet in Asia (no slouch at dinner either, with seafood galore, Asian specialties and homemade ice cream), a spa, meeting and banquet space, plus entertainment in the lobby and on casino floors.
The new strategies changed revenue mix dramatically. In 2008, junket play constituted 93% of gaming revenue through a variety of commission programs. In 2011, junket play was down to 38% of gaming revenue. More importantly, after two recession hit years, gaming revenue had grown 10% from 2008 to $211.4 million with overall revenue up 16% to $223.8 million. Net profit grew from $40 million to $92 million and Ebitda rose from $49.3 million to $111.8 million as margins improved from 26% to 50%. Perhaps most surprisingly, table minimums rose $100 for baccarat “squeeze games,” where players open their own cards, and $20-$40 for other table action.
With a strengthened operating base, it was time to “step up” on the VIP side, McNally says. Thanks to its low, fixed tax rate, NagaWorld can offer junket promoters revenues split starting at 70% to the promoter and rising based on roll. The resort built chic contemporary VIP suites, raised table limits to $200,000 and last August began hosting its first Macau junket promoter, Asian Nation. Last year, VIP roll grew 35% to $6.2 billion – about 10% of it from Asian Nation – and revenue rose 41% to $188 million. Suncity Group, Macau’s biggest promoter, is expected begin sending players this month.
To help bring in VIPs as well as tour groups, NagaCorp purchased a pair of Airbus A320 jetliners. The 180 seat planes are expected to begin service to Macau this month and mainland China in July, according to Union Gaming Research Macau, under NagaCorp’s Bassaka Air subsidiary. Given NagaCorp majority owner, chairman and CEO Chen Lip Keong’s background in aviation in his native Malaysia, “Bassaka Air could evolve into a full fledged airline,” McNally, a former FBI agent, says.
That’s all prelude to Naga2, an upgraded integrated resort rising across the street from the current building. Retail mall NagaCity Walk, designed by renowned resort architect Paul Steelman, will link the two sites, with China Duty Free as retail leasing agent and a major tenant. Naga2 will virtually double Naga’s size and capacity with an additional 300 tables, almost all for VIPs, 500 machines 1,000 guest rooms, additional meeting space and a 2,100 seat theater. The retail should open early next year and Naga2 in 2017.
Cambodia, though, is not enough for NagaCorp. The company has a $150 million resort on the drawing board for the new gaming zone outside Vladivostok in Russia’s far east, targeting players from northern China. The project is expected to break ground this year and open by 2018. NagaCorp has come a long way floating in a branch of the Mekong, and it’s not done yet.
Hong Kong On Air author Muhammad Cohen is Editor At Large for Inside Asian Gaming. Follow him on Twitter @Muhammad Cohen.