Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

Equity Bottom-Up

<ul class="">
<li>Unwarranted bearish sentiment lingers for Macau, but there is still money on the table for Cambodia's NagaCorp.</li>
<li>The company's core strengths make for continuing excellent performance: founder skin in the game, sound management focus, strong financials, ebullient market franchise.</li>
<li>Its Phnom Penh gaming exclusive was just extended by the Royal government till 2045.</li>
</ul>


Unwarranted bearish sentiment lingers for Macau, but there is still money on the table for Cambodia's NagaCorp.
The company's core strengths make for continuing excellent performance: founder skin in the game, sound management focus, strong financials, ebullient market franchise.
Its Phnom Penh gaming exclusive was just extended by the Royal government till 2045.


NagaCorp: Still a Standout Buy in the ASEAN Gaming Sector with Its Solid Business Model

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

During September, Asian HY investor focus shifted back to the ongoing Sino-US trade war, and away from problems in Argentina and Turkey.
Late in the month, the Trump administration again threatened to broaden the trade dispute with China into a financial flow war. Bloomberg has reported that some backers of the tariff war are in favour of imposing capital controls to manage: [1] the increasing currency imbalance; and [2] restrict the access of Chinese companies to US capital markets. Concurrently, there are two separate bipartisan bills circulating in Congress that would: [1] limit the flow of foreign capital into the US; and [2] force foreign companies listed in the US to comply with US auditing standards.

During September, Asian HY investor focus shifted back to the ongoing Sino-US trade war, and away from problems in Argentina and Turkey.
Late in the month, the Trump administration again threatened to broaden the trade dispute with China into a financial flow war. Bloomberg has reported that some backers of the tariff war are in favour of imposing capital controls to manage: [1] the increasing currency imbalance; and [2] restrict the access of Chinese companies to US capital markets. Concurrently, there are two separate bipartisan bills circulating in Congress that would: [1] limit the flow of foreign capital into the US; and [2] force foreign companies listed in the US to comply with US auditing standards.

Asia HY Monthly – Macau Gaming Update (September 2019)

<ul>
<li>For the six months, ended June 30th, Nagacorp continues to deliver across the board increases in revenues and earnings.</li>
<li>Cambodian tourism is up 70% y/y sported by strong political/economic ties with Beijing.</li>
<li>The resort's moat gets stronger despite issuance of 163 new licenses outside of its monopoly territory centered in Phnom Penh.</li>
</ul>


For the six months, ended June 30th, Nagacorp continues to deliver across the board increases in revenues and earnings.
Cambodian tourism is up 70% y/y sported by strong political/economic ties with Beijing.
The resort's moat gets stronger despite issuance of 163 new licenses outside of its monopoly territory centered in Phnom Penh.


At the Halfway Mark, Nagaworld Is Our Top Pick in the Asian Gaming Space

<ul>
<li>Cambodia's VIP gaming sector is showing vitality while slowing in other markets.</li>
<li>Buoyed by the success of Nagaworld2, the company has launched a Naga3 project plan to be financed 50% by its principal owner and internal funding.</li>
<li>Nagacorp is also betting on the Russian Far East with a project while Lawrence Ho has moved on concerned about higher gaming taxes there.</li>
</ul>


Cambodia's VIP gaming sector is showing vitality while slowing in other markets.
Buoyed by the success of Nagaworld2, the company has launched a Naga3 project plan to be financed 50% by its principal owner and internal funding.
Nagacorp is also betting on the Russian Far East with a project while Lawrence Ho has moved on concerned about higher gaming taxes there.


Revisiting Nagacorp: The News Is Good and Apt to Get Better, yet the Stock Is Still Cheap

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Thematic (Sector/Industry)

In previous credit cycles managed by Beijing, VIP and Mass GGR demonstrated a close correlation to M1 albeit with delays.  Change in M1 typically led VIP growth by 2-3 quarters. Change in VIP GGR growth led Mass GGR by 1 month.  M1 growth in China peaked at 33.2% in Q4 2009, driven by Beijing’s stimulus program to fend off the slowdown from the global financial crisis started in the US in 2008 spreading to Europe in 2009. VIP GGR growth peaked at 99% YoY in Q2 2010 and Mass up 37% immediately after.  The latest credit cycle in China peaked in Q3 2016, with M1 up 25%, 3 quarters ahead of VIP growth peaking at 35%. (Exhibit 1)<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/438/original/1.jpg?1547412238" class="editor-image img-responsive" data-smartkarma-image-id="75438"></figure>

In previous credit cycles managed by Beijing, VIP and Mass GGR demonstrated a close correlation to M1 albeit with delays.  Change in M1 typically led VIP growth by 2-3 quarters. Change in VIP GGR growth led Mass GGR by 1 month.  M1 growth in China peaked at 33.2% in Q4 2009, driven by Beijing’s stimulus program to fend off the slowdown from the global financial crisis started in the US in 2008 spreading to Europe in 2009. VIP GGR growth peaked at 99% YoY in Q2 2010 and Mass up 37% immediately after.  The latest credit cycle in China peaked in Q3 2016, with M1 up 25%, 3 quarters ahead of VIP growth peaking at 35%. (Exhibit 1)

Macau Gaming - Historical Correlation B/T Gaming GGR and M1

Cambodia

NagaCorp Limited is a leisure and tourism company with casino operations in Phnom Penh, the capital city of Cambodia. The Company also offers hotel accommodation, manages food and beverage outlets, recreational facilities, entertainmentand retail operations.

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NagaCorp Ltd (3918 HK)

NagaCorp: Still a Standout Buy in the ASEAN Gaming Sector with Its Solid Business Model

Unwarranted bearish sentiment lingers for Macau, but there is still money on the table for Cambodia's NagaCorp. The company's core strengths make...

Howard J Klein

Asia HY Monthly – Macau Gaming Update (September 2019)

During September, Asian HY investor focus shifted back to the ongoing Sino-US trade war, and away from problems in Argentina and Turkey. Late in...

Lucror Analytics

At the Halfway Mark, Nagaworld Is Our Top Pick in the Asian Gaming Space

For the six months, ended June 30th, Nagacorp continues to deliver across the board increases in revenues and earnings. Cambodian tourism is up...

Howard J Klein

Revisiting Nagacorp: The News Is Good and Apt to Get Better, yet the Stock Is Still Cheap

Cambodia's VIP gaming sector is showing vitality while slowing in other markets. Buoyed by the success of Nagaworld2, the company has launched a...

Howard J Klein

Macau Gaming - Historical Correlation B/T Gaming GGR and M1

In previous credit cycles managed by Beijing, VIP and Mass GGR demonstrated a close correlation to M1 albeit with delays. Change in M1 typically...

JL Warren Capital

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