Professional Documents
Culture Documents
June 2012
Company Overview
Entertainment Gaming Asia Inc. (the Company) is a leading gaming company focused on emerging gaming markets in Asia. The Companys gaming operations seek to capitalize on the fast growing opportunities in its target markets. Key gaming operations include: Gaming Machine Participation: The Companys current principal operations are the placement of electronic gaming machines (EGMs) on a revenue share (participation) model in casinos, resorts, hotels, and other venues in the Pan-Asian region. The Company currently has eight venues in operation in Cambodia and the Philippines with a total installed base of over 1,500 EGM seats. Casino Development: The Company is expanding its gaming operations to become an owner and operator of regional casinos under its Dreamworld brand by leveraging its established presence and relationships in Indo-China. The Company has one casino in operation and two projects in the pipeline in Cambodia. Gaming Chips & Plaques: The Companys wholly-owned subsidiary in Melbourne, Dolphin Products, manufactures and sells casino gaming chips and plaques to major casinos in Asia and Australia.
Melco Group (HK:200) holds approximately 38% interest in the Company. Melco Group, through Melco Crown (NASDAQ:MPEL), owns interests in gaming, hotel and resort properties such as City of Dreams, Altira Macau, and Mocha Slot in Macau.
Successful Turnaround
Over the past three years, the Company successfully completed a turnaround through:
(in US$000) Q1:12 Consolidated Revenue EGM participation revenue Adjusted EBITDA Net Income* Period End Cash Balance Period End Debt Balance 7,082 4,956 3,185 972 11,695 4,687 Q1:11 6,235 4,165 3,014 692 12,462 9,202 FY:11 27,129 17,396 11,737 642 12,759 6,211 FY:10 22,205 14,312 8,350 (5,210) 10,217 9,202 FY:09 15,623 6,998 140 (26,359) 4,190 9,393
* Includes non-cash impairment charges of $1.4 million, $3.5 million, and $14.7 million for the 2011, 2010, and 2009 respective fiscal years
Successful Turnaround
Note: Average WUD figures exclude EGMs operating during a new venues soft launch. Please see the Companys SEC filings on Forms 10-Q and 10-K for more detail.
Gaming Participation Operations Provides quality recurring cash flow Establishes presence and strong goodwill in key markets Demonstrates operational and execution expertise
Our Markets
Population (in millions) GDP 2011-16 CAGR Current Constant FDI 2006-10 CAGR Tourism 2011 2006-11 (in millions) CAGR
Country
Gaming Policy
Sources: Population: IMF World Economic Outlook Database September 2011, 2011 projections GDP: IMF World Economic Outlook Database September 2011, projections based on national currencies FDI (Foreign Direct Investment): World Bank Data Catalog Tourism: United Nations World Tourism Organization and respective countries departments of tourism projections
10
NagaWorld holds the exclusive casino license in a designated area around the capital of Phnom Penh Companys operations target tourists and growing population of expatriates and foreign passport holders living in the area
670 EGM seats under contract in prime ground floor slot spaces inside NagaWorld casino and resort
Jointly manage and operate the Companys EGMs with NagaWorld and the Company and NagaWorld share the net WUD and operating costs at a 25% / 75% ratio, respectively Company collects on a daily basis its 25% share in cash Contract duration for the total 670 EGM seats is six years, commencing March 1, 2010
11
12
13
Contract duration for the total 250 EGM seats is five years, commencing from the slot floor opening
14
15
16
The Company developed, owns and operates Dreamworld Pailin, a casino in the Pailin Province of Northwestern Cambodia at the Thailand border
Strategically located on a growing trade route with solid infrastructure between Cambodia and Thailand (approximately five hours from Phnom Penh and four hours from Bangkok by car), the casino will cater to mass market and premium players from the major nearby cities in the region
Key facts: Initial phase opened May 9, 2012 Features with mass market and VIP facilities including 30 table games (baccarat, variations of poker, and dice games) and 50 EGM seats The initial capital investment by the Company was approximately $2.5 million (funded internally) for the design and construction, and casino equipment The Company has exclusive management control of the casinos development and business operation The Company leases the land from a local land owner and the Company is entitled to receive 80% of the monthly net revenue after customer payouts, operating expenses, and taxes The Company has first right to lease from the local land owner adjacent land to the initial phase of the project, where an existing and popular casino is currently in operation, to potentially develop additional phases Lease term of 20 years with renewal options
17
18
19
20
21
22
Strong improvement in WUD driven by initiatives focused on highest-potential venues Implementing, with the support of our venue owner partners, targeted marketing programs Working with venues owners to extend venue hours of operation Redeploying, when possible, gaming assets from lower to higher performing venues in the market Acquiring higher revenue sharing interests in most promising venues under participation contracts; In October 2011, the Company announced an agreement to increase its revenue sharing rights to 35% from 17% of net win and its control of marketing in the San Pedro VIP Club
23
24
25
Through Dolphin Products, Entertainment Gaming Asias wholly-owned subsidiary in Melbourne, Australia, the Company is one of the few manufacturers of both traditional and RFID gaming chips and plaques
Provides full product offerings of chips and plaques with leading-edge, currency grade security features Commitment to continuously improving product quality and processes through ongoing investment in R&D Planned investments in manufacturing to increase production capacity and improve efficiency
Dolphin has patents or patent applications for the manufacture process of gaming chips and plaques (RFID and non-RFID) in Australia, Macau, and Europe Dolphin has built a strong reputation in Southeast Asia and Australasia with an estimated market share of 16% of these combined markets and is poised to expand within these existing and other foreign markets*
Dolphins customers include City of Dreams (Macau), Altira (Macau), Galaxy (Macau), Las Vegas Sands (Macau), Venetian (Macau), Thansur Bokor (Cambodia), Crown Casino (Melbourne), Burswood Casino (Perth), StarCity (Sydney) and others
The Company believes the market potential for Dolphin RFID technology in gaming chips and plaques is significantly under-exploited
The Company estimates only approximately 15-20% of gaming chips and plaques in its core markets of Southeast Asia and Australasia are RFID enabled and the adoption rate is growing
* Gaming Partners International (NASDAQ: GPIC) has an exclusive license on two patents to make and sell RFID chips and readers for chip tracking the U.S., which expires in 2015. These patents are owned by International Game Technology (NYSE:IGT). 26
Investment Considerations
Targeting emerging Asian gaming markets which we believe to be under-served and poised for growth with attractive economic trends and strong demand Gaming participation business offers recurring daily or monthly revenue model with compelling cash flow potential Successful operation at NagaWorld in Cambodia provides strong revenue and cash flow contribution and builds credibility for Entertainment Gaming Asia as a casino operator in Indo-China Expansion into role of casino owner and operator provides incremental growth strategy to the gaming business with strong potential returns and greater operational control Senior management team with strong industry and regional knowledge and relationships Successfully completed restructuring of operations resulting in improved financial performance, greater operating efficiency, and improved financial flexibility With solid cash flow from operations, improved operational efficiency, and established and expanding presence in its target markets, Entertainment Gaming Asia is poised to capitalize on the growth opportunities in targeted emerging gaming markets in Asia.
28
(1) Average WUD figures exclude EGMs operating during a new venues soft launch. Please see the Companys SEC filings on Forms 10-Q and 10-K for more detail.
29
(1) Adjusted EBITDA for FY:10 and FY:09 were restated to include loss on dispositions.
Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, stock-based compensation, and other non-cash operating income and expenses. Adjusted EBITDA is presented exclusively as a supplemental disclosure because management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Management uses Adjusted EBITDA as a measure of the operating performance of its segments and to compare the operating performance of its operations with those of its competitors. The Company also presents Adjusted EBITDA because it is used by some investors as a way to measure a companys ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported EBITDA as a supplement to financial measures in accordance with generally accepted accounting principles in the United States (GAAP). Adjusted EBITDA should not be considered as an alternative to operating income/(loss) as an indicator of the Companys performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income/(loss), Adjusted EBITDA does not include depreciation or interest expense and, therefore, does not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using Adjusted EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income, net income/(loss), cash flows from operations and cash flow data. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA. Entertainment Gaming Asias calculation of Adjusted EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
30
Q1:12
Q1:11
FY:11
FY:10
FY:09
Gaming Operations Installed EGM Seats on Participation at Period End Average Consolidated WUD (1) Revenue Cost of Sales Gross Profit Other Products Revenue Cost of Sales Gross Profit Total Gross Profit SG&A Expenses Stock-Based Compensation Expenses Impairment of Assets Flood Damage Losses (Gain)/loss on Dispositions of Assets Product Development Expenses Depreciation and Amortization Restructuring Charges EBIT Other Income/(Expenses) Income Tax Benefit/(Expense) Net Income/(Loss) from Continuing Operations Net Income from Discontinued Operations, Net of Tax Net Income/(Loss)
$ $
1,560 154 4,956 2,311 2,645 2,126 2,006 120 2,765 1,585 265 (12) 100 31 796 230 (54) 972
$ $
1,638 134 4,165 2,091 2,074 2,070 1,764 306 2,380 1,198 223 80 30 849 (18) (139) 692
$ $
1,477 140 17,396 8,579 8,817 9,733 8,346 1,387 10,204 5,880 1,452 1,351 175 386 113 847 (154) (51) 642
$ $
1,547 117 14,312 8,779 5,533 7,893 6,916 977 6,510 5,880 887 3,460 164 610 885 310 (5,686) (189) 665 (5,210)
$ $
1,299 89 6,998 11,105 (4,107) 8,625 6,771 1,854 (2,253) 7,953 876 14,687 83 107 277 1,037 623 (27,896) 483 (486) (27,899) 1,540
972
692
642
(5,210)
(26,359)
(1) Average WUD figures exclude EGMs operating during a new venues soft launch. Please see the Companys SEC filings on Forms 10-Q and 10-K for more detail. Note: As a result of a Quasi-Reorganization effected December 31, 2010, consolidated statements of operations for the FY11 are not comparable to the FY10 and FY09 periods. The statements of consolidated operations for FY11 reflect depreciation and amortization of the assets using the basis from a quasireorganization and the statements of consolidated operations for FY10 and FY09 are prepared on the Companys historical basis of accounting.
31
3/31/2012
12/31/2011
12/31/2010
12/31/2009
Total Debt $ 4,687 Debt to Capital Ratio 0.12 Note: Reflects Quasi-Reorganization effected December 31, 2010
32