by winston » Tue May 07, 2019 11:37 am
BREAKINGVIEWS-Casino mogul's Cambodia cash hedges investors?
By Katrina Hamlin
HONG KONG, May 7 (Reuters Breakingviews) - NagaCorp's<3918.HK> founder is giving investors a $1.8 billion confidence boost.
Chen Lip Keong, also the company's chief executive, has pledged to cover more than half of the cost of building Asia's largest gambling resort, in the Cambodian capital Phnom Penh.
The group faces more competition, and both Cambodia and the gambling industry depend heavily on China. But investors can find reassurance in the personal punt.
Since the $5 billion company first outlined the expansion inApril, shares have fallen by roughly 14 percent. Naysayers question whether Chen can fill the $3.5 billion-something project's cavernous gaming halls and more than 4,000 hotel rooms, on top of an existing, sprawling casino-resort in the Southeast Asian country.
There are plenty of risks. For one, China has dominated investment into Cambodia, bringing expatriate workers and tourists. Links with Beijing have been strong under Cambodian Prime Minister Hun Sen, and the two sides announced a handful ofdeals including military aid late last month.
But any economic wobbles across the border could be a headache, for visitors and for Naga. Hun Sen's dismal human rights record, moreover, hardly guarantees stability.
There are also more rivals for gamblers' cash. Local contenders are ambitious. Meanwhile, experienced operators like Las Vegas Sands and Genting, are flourishing outside Macau - in Singapore, Philippines and Vietnam- drawing big-spenders.
Chen still has a good hand. For one, he was first in a primespot. The Malaysia-born boss has navigated an era of extraordinary change in Cambodia, and NagaCorp has grown steadily over two decades.
He has some support from the government, visible in a concession that runs until 2065, and a monopoly in the Phnom Penh area until 2035. Chen hedges his China bet by cultivating a Southeast Asian clientele too.
Naga, with negligible debt, could arguably have raised capital on the market. But its risky profile does mean highcosts. Chen, who already holds a 66 percent stake, converts his contribution into shares at the end of the six-year construction period at a not unreasonable HK$12 a piece, roughly a fifth above the current price.
Importantly, he takes on the risk of delay and collapse too. It's a hefty show of support.
Source: Reuters
It's all about "how much you made when you were right" & "how little you lost when you were wrong"