Business & Finance
Wed, May 19, 2010Tue, May 18, 2010Mon, May 17, 2010Sat, May 15, 2010Fri, May 14, 2010Thu, May 13, 2010Wed, May 12, 2010Asia Entertainment & Resources Ltd. Reports 2009 Financial Results
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Published in Business and Finance on Friday, May 14th 2010 at 11:15 GMT by Market Wire🞛 This publication is a summary or evaluation of another publication
HONG KONG--([ BUSINESS WIRE ])--Asia Entertainment & Resources Ltd. (AERL) (OTCBB: AERCF) (OTCBB: AERLF), which operates through its subsidiaries as a VIP room gaming promoter, today announced audited combined statement of operations of its affiliated VIP gaming promoter companies (Promoter Companies) for the year ended December 31, 2009. The Promoter Companies are affiliates of Asia Gaming & Resort Limited (Asia Gaming), which AERL acquired on February 2, 2010. The operations of the Promoter Companies constitute all of AERLa™s business and are the source of its revenues and earnings.
a2009 continued strong growth in the Macau VIP gaming industry, which is evidenced in our 62.7% growth in Rolling Chip Turnover year over year. As the first Asian VIP gaming promoter to list shares publicly in the U.S., we are pleased to offer investors the ability to capitalize on a growing industry,a said Leong Siak Hung, CEO of Asia Entertainment.
2009 Summary of the Audited Combined Statement of Operations of the Promoter Companies
US GAAP Revenues totaled $60.4M in 2009 compared to $51.0M in 2008, an increase of 19% year over year. Revenues are primarily derived from the Rolling Chip Turnover, which is a metric used by casinos to measure the volume of VIP gaming room business transacted and represents the aggregate amount of bets players make.
- Total Rolling Chip Turnover in the Promoter Companies VIP gaming rooms during the year ended December 31, 2009 was $5.192 billion, up 62.7% from $3.191 billion in 2008.
- VIP gaming promotersa™ gross win rate as a percentage of Rolling Chip Turnover during the year ended December 31, 2009 was 2.5%, down from 3.3% in 2008.
- While Rolling Chip Turnover was up 62.7%, net gaming win revenue for 2009 totaled $54.3M compared to $42.6M in 2008, up 27.5%, the slower growth rate due to the decline in the win rate from 2009 versus 2008. Net gaming wins are primarily derived from win rate percentage of the Rolling Chip Turnover.
- Fees and allowances amounted to $6.2M in 2009 compared to $8.4M in 2008.
Net income in 2009 totaled $15.6M or 26% of revenues. This compares to net income of $20.2M or 40% of revenues in 2008. The decline in net income was due to the decrease in the win rate percentage despite the increase in Rolling Chip Turnover.
The commission to agents in 2009 was $39.1 million, up 56.4% from $25.0 million in 2008 due primarily to the increase in Rolling Chip Turnover. Selling, general and administrative expenses declined by 4% for the combined entity in 2009 compared to the legacy entity in 2008.
On a pro forma basis, assuming the acquisition of Asia Gaming occurred on January 1, 2009, AERL would have had diluted earnings per share of $0.45, based on 32,363,224 shares outstanding.
AERLa™s VIP rooms are primarily focused on high stakes baccarat. Baccarat accounts for approximately 88% of total Macau casino winnings. AERLa™s VIP gaming promotersa™ gross win rate as a percentage of Rolling Chip Turnover has historically ranged between approximately 1.1% and 4.5%. The industry average gross win rate for baccarat is approximately 2.85% to 3.00%. Based on a statistical average of 3.00%, AERLa™s net profit before general and administrative expenses is typically 0.45% of the Rolling Chip Turnover.
Theoretical win rates for the Promoter Companiesa™ VIP gaming room operations depend on a variety of factors, some beyond their control. The gaming industry is characterized by an element of chance. In addition to the element of chance, theoretical win rates are also affected by other factors, including gaming patronsa™ skill and experience, the mix of games played, the financial resources of gaming patrons, the spread of table limits, the volume of bets placed by the Promoter Companiesa™ gaming patrons and the amount of time gaming patrons spend on gambling a" thus VIP gaming roomsa™ actual win rates may differ greatly over short time periods, such as from quarter to quarter, and could cause quarterly results to be volatile. These factors, alone or in combination, have the potential to negatively impact the VIP gaming roomsa™ win rates.
The VIP room in the Galaxy Star World in Downtown Macau was successfully transitioned to a 1.25% commission on Rolling Chips Turnover at year-end 2009, where there is no shared risk with the casino or volatility from patronsa™ winning. Historically, the Companya™s net gaming win revenue was based the win rate split model. On a win rate split agreement with the casino, the Company splits the win on an agreed basis. Below a 1.9% win rate, the Company may lose money due to the ratio of commissions paid out to agents and collaborators.
Definition of Rolling Chip Turnover
Rolling Chip Turnover is used by casinos to measure the volume of VIP business transacted and represents the aggregate amount of bets players make. Bets are wagered with "non-negotiable chipsa and winning bets are paid out by casinos in so-called "casha chips. "Non-negotiable chipsa are specifically designed for VIP players to allow casinos to calculate the commission payable to VIP room gaming promoters. Commissions are paid based on the total amount of "non-negotiable chipsa purchased by each player. VIP room gaming promoters therefore require the players to "roll,a from time to time, their "cash chipsa into "non-negotiablea chips for further betting so that they may receive their commissions (hence the term "Rolling Chip Turnovera). Through the promoters, "non-negotiable chipsa can be converted back into cash at any time. Betting using rolling chips, as opposed to using cash chips, is also used by the DICJ (Macau Gaming Control Board) to distinguish between VIP table revenue and mass market table revenue.
About Asia Entertainment & Resources Ltd.
AERL, formerly known as CS China Acquisition Corp. (aCS Chinaa), acquired Asia Gaming on February 2, 2010. The principal business activities of Asia Gaming and its wholly owned subsidiaries are to hold Profit Interest Agreements with the Promoter Companies and to receive 100% of the profit streams from the Promoter Companies. The Promoter Companies currently participate in the promotion of two major luxury VIP gaming facilities ("VIP rooms") in casinos in Macau, China, the largest gaming market in the world. One of the Macau VIP rooms is located at the top-tier MGM Grand Macau Casino in downtown Macau and is operated by the MGM Grand Paradise S.A. The other Macau VIP gaming facility is located in the luxury 5-star hotel, the Star World Hotel & Casino that is operated by Galaxy Casino, S.A. in downtown Macau. In addition, the Promoter Companies plan to promote the first luxury VIP room in Jeju Island in South Korea, which will offer Macau-style gaming, and have concluded a favorable trial operation there.
Forward Looking Statements
This press release includes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Forward looking statements are statements that are not historical facts. Such forward-looking statements, based upon the current beliefs and expectations of AERL's management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements.
