Emerging markets have a great deal to offer across a full gamut of industries. Asian countries comprise a large portion of emerging markets with deep roots in established countries and burgeoning industries in smaller countries fuelling continued growth while geopolitical and economic turmoil have been ravishing more established cultures.
Tourism of all sorts has been especially hot-button in recent years in Asia, or Pan-Asia (a term used to describe Asian nations as a whole to create a continental identity), with the vacation and medical tourism industries beginning to truly flourish.
Based in Hong Kong, Entertainment Gaming Asia Inc. (AMEX:EGT) is looking to capitalize on the growing gaming industry and worldwide tourist interest in the Asian communities. According to a 2010 survey by the American Gaming Association, Asia holds incredible potential in global casino expansion and may produce more industry revenue than the United States in the next three to five years.
EGT has set up shop with gaming operations in Cambodia and the Philippines, areas that fit right into the Company’s wheelhouse because of their understanding of the markets, established presence and relationships in the space, including local governments. 260 million people populate Cambodia, Philippines and the surrounding countries of Vietnam and Thailand.
Today, Entertainment Gaming Asia reported a change in contracts which should positively impact future revenue generation. A new agreement has boosted its revenue sharing rights in San Pedro VIP Club, one of its best performing venues amongst its Philippine operations. The Club is run by the government operator, Philippine Amusement and Gaming Corporation (PAGCOR), which is then in a contract with a different company that owns the Club. The owner then is contracted with Entertainment Gaming Asia.
The net proceeds from all 180 of EGT’s electronic gaming units in the San Pedro Club are then divided amongst all three organizations at the rate of 65% to PAGCOR, 18% to the owner and 17% to Entertainment Gaming Asia. The new deal greatly boosts EGT’s cut in the process as for $1.3 million (from its cash reserves), it will take over the proceeds position of the owner and work directly with PAGCOR.
The deal is subject to certain conditions, but if completed will raise EGT’s percentage to 35%, while PAGCOR will retain 65%. The net win from each machine equals approximately $70 - $80 per day presently. At the low end, the new deal will equate to roughly $25 per day per machine for Entertainment Gaming Asia, or $4,500 per day in total for all EGT machines at the Club.
Today’s news has not generated any particular excitement from investors as the Company is still largely under the radar screens of most. Shares of EGT closed down almost 3% on average volume. Sometimes it takes time for good news to sink in; only time will tell for this Company.
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