Casino May Close After $2.5 Million Writeoff

Entertainment Gaming Asia (EGA) on Tuesday announced it had written off its $2.5 million investment in Dreamworld Ca­sino in Pailin province due to lower-than-expected player traffic crossing the Thai border and said it may pull out altogether, according to a filing on the NASDAQ stock market.

EGA, which is backed by Macau-based casino operator Melco International Develop­ment, also runs slot machines in Phnom Penh’s NagaWorld and Thansur Bokor in Kampot pro­vince.

It opened a second Dream­world casino in March in Poipet City, Banteay Meanchey pro­vince.

Its flagship casino in Pailin, which opened in May 2012 targeting Thai gamers across the border, has seen a steady decline in revenue and EGA warned investors in September that it was to begin leasing tables to offset operating costs and increase revenue.

However, third party rentals failed to turn around the casino’s fortunes and on Friday the board of directors decided to write off its entire capital investment of $2.5 million as an impairment charge, in line with U.S. financial regulations.

“[A]t the present time, [third-party rental income and slot revenue] operations do not generate positive cash flow and management does not see an avenue to improve profitability under this model,” the statement says.

“Therefore, the company in­tends to record a non-cash impairment charge of approximately $2.5 million as of December 31, 2013, [which] represents the entire capital expenditure in­curred by the Company for the property as of December 31, 2013, with the exception of those assets that the company believes could be redeployed to other ex­isting properties,” it adds.

Revenue from the Pailin casino for the three-month period ending September 30 was $432,000, a more than 50 percent drop from the $907,000 earned during the preceding three-month period ending June 30 due to reduced traffic, according to the most recent published results.

Options being considered by EGA include subletting the entire Pailin casino complex, or ceasing operations.

Sao Sarat, cabinet chief for the Pailin provincial government, said he did not know why Dream­world Casino was struggling because Thai gamblers were continuing to cross the border in their usual numbers.

“Although there are political problems in Thailand, nothing has changed and Thai people along the border keep coming in as normal,” he said, adding that recent reports of indebted gamblers being imprisoned and tortured by Cambodia’s border casinos has had no effect on the number of visitors.

However, Chrun Theravuth, chief of the casino management office at the Ministry of Finance’s industry department, said EGA’s difficulties in Pailin could be blamed squarely on the ongoing political crisis in Thailand.

“The current political crisis in Thailand is the root cause of the decline in casinos’ revenue along the border, because there are no other nationalities coming in,” he said.

The recent fatal shooting of protesters by military police in Phnom Penh will have played no role in declining casino profits because the law does not permit Cambodians to play games in the casinos, Mr. Theravuth said.

EGA’s total revenue from 1,756 gaming seats in Cambodia de­creased $595,000 to $10.5 million for the first nine months of last year—compared to $11.1 million for the same period the year before—mostly due to decreased revenue from NagaWorld in Phnom Penh and to a lesser extent in Thansur Bokor, the company’s November report states.

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