How To Invest In The Largest Gaming Company of Cambodia

NagaCorp Ltd (HKG: 3918) is a major casino operator and gaming company listed on the Hong Kong Stock Exchange. Unlike its peers such as Galaxy Entertainment or Sands China that focus on the Macau market, NagaCorp’s casinos are located in the less affluent but fast-growing market of Cambodia. 

In this article, we will take a closer look at NagaCorp’s business profile, growth history, earnings trend, and its prospects.   

Business Overview 

NagaCorp operates NagaWorld, the largest gaming and entertainment complex in the Mekong Region located in Phnom Penh. It comprises hotels with 1,600 rooms, casinos with more than 500 gaming tables, and an underground duty-free shopping mall.  

The group enjoys a 70-year casino license that will run till the year 2065. Its exclusive rights to run casinos within a 200-km radius of Phnom Penh have just been extended by 10 years to 2045. 

NagaWorld complex during development. Source: Kiensvay

NagaCorp is currently building Naga 3 which will significantly increase the capacity of NagaWorld. Expected for completion in the year 2025, it will feature an additional 800 gaming tables and 4,720 hotel rooms. 

The group derives its revenue from predominantly the gaming segments, which are further broken down into Mass Market Gaming and VIP Market Gaming. In the financial year 2019, gaming contributed 98% of total revenue, with 71% coming from Vip Market and 27% coming from Mass Market.

The non-gaming segment which consists of hotels, food and beverages, and entertainment, constituted only 2% of total revenue. 

Source: NagaCorp corporate website

Latest Financials 

NagaCorp recorded strong growth in 2019. Revenue increased by 19% to US$1.75 billion, leading to a net profit growth of 33% to US$521 million. The higher revenue is boosted by a large increase in gaming revenue which grew 20% to US$1.7 billion.  

The revenue growth was broad-based across both the mass market and VIP segments. The mass market benefited from the higher tourism numbers particularly from China and hosting of international entertainment and events. 

VIP Market segment registered robust growth due to the junket incentive programme and new junket operators commencing fixed base operation at NagaWorld. 

Profitability Trend

NagaCorp has an enviable growth record since 2014. Casino and hotel expansion coupled with rising tourism figures helped to grow the group’s revenue and net profit by 34% and 31% per year to US$1.7 billion and half a billion respectively. 

Source: NagaCorp corporate website

Balance Sheet Strength

The balance sheet remained strong, as the amount of cash, bank balances, fixed deposits, and cash-equivalent were more than the group’s debts. This had been the same trend in the past five years as NagaCorp funded its casino expansion using internal resources instead of raising debts.  

Cash Flow Trend

Net operating cash flow expanded at a compounded annual rate of 33% per year. This is very close to the revenue and net profit growth rate, indicating that NagaCorp runs a healthy business with a strong cash generation ability. 


Senior Management

NagaCorp’s founder Dr Chen Lip Keong, aged 72, leads the company as the CEO and an executive director. Dr Chen holds at least a 44.17% direct stake in the group, which aligns his personal interest directly with other retail investors. 

I would say Dr Chen had done a good job building and growing the company, as seen from its strong historical growth. 

Strengths and Opportunities

NagaCorp key strength lies in its exclusive license to operate casinos within a 200-km radius of Phnom Penh up till the year 2045. Furthermore, the license has little restrictions on the number of tables, types of game, gaming space, and gaming promoter commission, thus granting the group great flexibility in refining its operations to best suit market demands and visitors’ needs. 

Cambodia’s developing economy with a robust domestic business environment attracts increasing foreign investment. There was US$3.6 billion of investment inflow in 2019, a 12% increase from the year 2018. This entails more business-related and leisure travellers into Cambodia which serves as a strong tailwind to NagaCorp.

In particular, its proximity to China should attract more Chinese gamblers and give the Macau casinos a good run for its money.

The group has prepared itself to fully capture the opportunities ahead. As mentioned earlier, several large Macau junket operators have commenced operations to bring in VIP clients. The Naga 3 expansion will raise NagaWorld’s rooms and gaming capacity by at least two times, further solidifying its position as the largest entertainment resort in the Mekong region.

Weaknesses and Threats

The gaming industry belongs to the consumer discretionary sector which is highly susceptible to economic slowdown that reduces tourist arrival and consumer spending. The ongoing Covid-19 outbreak is a good example of such a risk. 

NagaCorp also faces key man risk with its founder and CEO Dr Chen getting on in age. Proper succession planning needs to be in place to minimise leadership uncertainty. On this issue, the executive deputy chairman, Philip Lee Wai Tuck, has rich experience in financial and management functions in senior management positions of various Bursa-listed companies. Mr Chen Yiy Fon, Dr Chen’s son, was appointed an executive director in 2015 as well.

Peers Comparison

Compared to its peers, NagaCorp’s valuation is rather low. Its year 2020 estimated price-earnings ratio of 13.4 times is not excessive, given its stellar historical growth and bright prospects.



NagaCorp seems to fit the bill as an ideal growth stock, judging by its revenue and earnings track record, low gearing, strong cash flow, and exciting opportunities ahead. 

However, it is in the consumer discretionary sector hence is heavily impacted by reduced tourists’ arrival. Its gross gaming revenue is likely to see a contraction in the first quarter of 2020 due to the coronavirus outbreak. 

In summary, NagaCorp offers investors unique exposure to the fast-growing Cambodia market. Those with a high-risk appetite who believe in the eventual recovery of tourists’ arrival may consider buying the share. 

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