AGBriefings August 2016

JURISDICTION UPDATES August 2016 Edition

SPECIAL FOCUS

Melco Crown marriage on the rocks?

Diverging paths raise questions about future direction pg.28

AUSTRALIA

Industry laments missed opportunity in new online rules pg.34

HONG KONG

HKJC turns to tech in race to woo millennials pg.10

PHILIPPINES Assessing the potential of island life pg.14

VIETNAM

Regulatory logjam breaks pg.26 Asia Gaming Awards 2016

WINNERS pg.30

AGE 2016 SUPPLIER SPECIALS pg.42

MESSAGE 3

Off to Sydney

I

n this Australasia-geared edition of Asia Gaming

Ascent’s Tigre de Cristal in Primorye last year, with the

Briefings we take a stroll down memory lane to look

deputy head of the Russian Association of Gambling

at one of the most iconic joint ventures in the gaming

Business describing the situation as “deplorable.” South

industry. Ten years after Melco Crown Entertainment’s

Korea, on the other hand, appears to have got off to a better

2006 IPO, there are signs that the partnership between two

start this year, registering some recovery in VIP helped by

of the world’s largest casino operators is not living up to

arrivals from Japan.

sky-high expectations. The initial plan was to “conquer the

In Indochina, Cambodia seems to be benefiting from the

world” together, but Melco and Crown have recently opted

downturn in Macau, with analysts predicting it’s likely to

to go solo into new markets and opportunities.

be the best-performing VIP market in the world in 2016.

From an AGB perspective this is also a very special edition

However, Vietnam’s plans to open its market to allow

as we publish a post-event photo essay of the inaugural

locals to gamble may cast a shadow. Meanwhile Vietnam’s

Asia Gaming Awards. The event, the only one of its kind in

long-delayed draft casino bill has finally been submitted to

Asia, was hailed as a roaring success. It’s designed to honor

the government in a move many in the industry say will be

and recognize the achievements of the industry. The event

a game changer for the country’s gambling industry.

took place during G2E Asia in May in Macau and the gala

In Australasia, the industry is intrigued with the stellar

evening brought together more than 330 gaming executives

performance of Imperial Pacific, which plans to double its

from across Asia to celebrate the best the industry has to

investment in Saipan, while experts say Australia’s recent

offer. A total of ten awards, spanning the land-based and

review of online gambling was a missed opportunity to

online spheres, were awarded.

take the regulatory lead in the Asia Pacific region.

We start this edition’s Jurisdiction Updates with Macau’s

Asia Gaming Brief is thrilled to be on its way to Sydney

tourism development masterplan, which aims to transform

to take part once again in AGE and GRWA. AGB will be

the VIP gaming hub into a mass market, diversified leisure

doing the rounds at the Australasian Gaming Expo on

destination, with a target for as many as 40 million tourists

Tuesday and Thursday while chairing the land-based day

a year by 2025.

on Wednesday 10 August at Gaming Racing & Wagering

Across the Pearl River delta, it’s off to the races in Hong

Australia.

Kong to look at what virtual reality, touchscreens and social

If you would like to book a meeting please email us at

media have to do with the future of racing.

enquiries@agbrief.com.

In South East Asia we take a look at how the Philippines

Meanwhile in these pages, you can take a look at what the

is expanding its casino offerings outside of Manila’s

main exhibitors will have in store for you on the enlarged

Entertainment City, with some operators hoping to

show floor at AGE on Glebe Island.

capitalize on the beauty of its islands. While in Singapore,

Happy reading and see you in sunny Sydney!

Rosalind Wade

Luis Pereira

where the VIP market continues to drag, the city state eyes non-gaming for growth. Across the border Genting Malaysia is ramping up for the roll out of the first stages of its $2.46 billion Integrated Tourism Plan during the second

@agbrief

Asia Gaming Brief

Asia Gaming Brief

half of the year.

On behalf of Asia Gaming Brief

Jumping to North Asia, Russia’s gambling zones appear to

Rosalind Wade & Luis Pereira

be struggling despite the high-profile launch of Summit

PUBLISHERS

AUGUST 2016 EDITION SERIES II • ISSUE XIII

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Asia Gaming Briefings | August 2016

CONTENTS 4

NORTH ASIA

GREATER CHINA MACAU HONG KONG

06 10

AUSTRALASIA

RUSSIA

20

AUSTRALIA

34

SOUTH KOREA

22

CNMI

38

INDOCHINA

SOUTH EAST ASIA

SOUTH ASIA

THAILAND

12

CAMBODIA

24

PHILIPPINES

14

VIETNAM

26

MALAYSIA

18

SINGAPORE

19

SPECIAL FOCUS

Asia Gaming Briefings | August 2016

28

ASIA GAMING AWARDS

30

SUPPLIER SPECIAL REPORT

42

INDIA

LAST WORD

40

54

GREATER CHINA

6

MACAU

If you build it will they come? – Macau’s tourism challenges Macau’s tourism development masterplan, which aims to transform the VIP gaming hub into a mass market, diversified leisure destination, forecasts as many as 40 million tourists a year by 2025.

Asia Gaming Briefings | August 2016

GREATER CHINA

T

7

he blueprint contains a clear vision of what the government wants for the future, with tourists staying longer and spending more on non-gaming activities.

However, tourism industry experts say the current obstacles will be hard to overcome and as yet there is not a clear enough consensus between the government and industry as to what “brand” Macau should look like. The territory lacks affordable hotel rooms and many infrastructure improvements designed to improve transport and other bottlenecks have been consistently delayed.

Macau Government Tourism Office Director Maria Helena de Senna Fernandes told local media that the Macau Tourism Industry Development Master Plan aims to boost the tourist industry by expanding the waterfront area and increasing the number of budget hotels. It aims to generate nongaming revenues of MOP112 billion ($14 billion) by 2025.

Non-gaming promotions The plan sees visitor arrivals at between 33 to 35 million yearly in a low-growth scenario of an increase of just one percent to two percent a year. That could reach 38 to 40 million with a modest growth outlook of about 3 percent to 5 percent.

“Gaming has exerted too much influence on the tourism branding of Macau. Promotions related to non-gaming tourism products should be strengthened in the future,” the plan says. “Macau has the potential to exhibit an impressive image by reconciling its resort facilities, MICE [meetings and conventions], arts and festival events all into one integrated brand.”

GROSS GAMING REVENUE Y15 MOP 230.84b June

-34.3%

-8.5%

Y16E MOP200bb (Source: DICJ)

Shift in focus Glenn McCartney, an expert in Macau’s tourism who has worked as a consultant to the government, says the plan is a step in the right direction, with a shift in focus onto more relevant economic pointers.

He says up until now the government has tended to place too much emphasis on hotel occupancy rates and high visitation, which are both flawed measures as hotel stays can be driven by comping and visitation numbers don’t take into account spending ability and length of stay.

“

GAMING HAS EXERTED TOO MUCH INFLUENCE ON THE TOURISM BRANDING OF MACAU.

”

Right direction “We were certainly not looking at the right indicators but now we’re looking at the right indicators, so that’s good, he said. “We’ve had two years of incremental downturn so it’s not going to work overnight. Competitiveness takes a lot of work. Coming up with a branding strategy takes a lot of time and a lot of work.”

Macau’s total visitor arrivals were 30.7 million in 2015, and it ranked among the top-listed cities in terms of visitation. It came in 6th out of the top 100 cities worldwide in

2014, the blueprint says. Though the numbers are impressive at first glance, those visitors only stay for a relatively short space of time compared with other major cities around the world.

In 2014, the average length of stay in Macau was 1.9 days, while Singapore and Hong Kong saw visitors stay for 3.7 and 3.3 days, respectively, and London and Las Vegas with 4.6 and 4.2 nights, respectively.

In addition, more than 90 percent of visitors to Macau are from Greater China, with 66.5 percent from Mainland China. Only around 9 percent of visitors are from other countries and that presents another challenge. CLSA research has carried out a survey of middle class Chinese on the mainland for the past three years about their preferred travel destinations and found Macau came last.

Costly accommodation One of the main problems facing Macau is the lack of affordable hotel rooms. With the new resorts opening up on Cotai, the overall number of rooms will increase by about 40 percent over the next three to four years, however, they will still be far from budget accommodation.

“When we have surveyed people and asked why they didn’t stay the night, 48 percent said the room rate was too high, so we think hotel room rates need to come down to attract more visitors,” CLSA regional head of consumer and gaming Aaron Fischer said in a presentation at G2E Asia in May. “If you actually look at the room rates for some of the leading properties, it’s above $200 and can be $300 at the weekends,” he said.

Meanwhile, according to a recent survey of 1,000 Chinese gamblers by Morgan Stanley, respondents reported shorter stays, lower

AML laws tightened Macau has introduced new anti-money laundering rules for its gaming industry, which have been effective since May 13. The new measures include providing “adequate” risk management systems, keeping daily records and hiring compliance officers. The new rules also prevent junkets and casinos conducting business with people using aliases or under anonymity, and casino operators are now obliged to verify and sign any “large sum” transaction report submitted by junkets operating in their facilities.

Asia Gaming Briefings | August 2016

GREATER CHINA 8

GROSS GAMING REVENUE Y16E -1% VIP Y16E -10% (Source: CLSA)

VIP REVENUE Y16E -16% Y17E 0%

LRT system to be operational by 2019 The government says it will complete the Taipa section of the long-delayed Light Rail Transit system, consisting of 11 stations by the end of this year. However the LRT, which is seen as crucial in helping drive mass visitation to Cotai resorts, won’t be fully operational until 2019.

frequency of visits (from 4.4 to 3.3 visits per year) and a decline of total travel budgets.

According to the Morgan Stanley survey, Macau’s problems among Chinese gamblers extend to include UnionPay and foreign exchange risks, as well as the competition posed by the opening of the Shanghai Disney. Dependence on UnionPay cards for cash remains high at 60 percent, said Morgan Stanley, with 55 percent of respondents saying they would shorten their stay or search for cheaper options if China’s RMB depreciated further.

The brokerage also notes that Macau’s gaming recovery may be more reliant on China’s economy than consensus assumes.

Other destinations The number of visitors from Europe, North America, and other long haul markets has also been declining in recent years, which is not good news for a destination seeking to reduce its reliance on the mainland tourist dollar.

Some analysts have said the opening of super-luxury hotel The 13 later this year may help put Macau back on the international jet set map. Bucking the current market trend towards the mass market, the hotel will be one of the world’s most expensive at about $7 million a key to develop.

Asia Gaming Briefings | August 2016

(Source: Morgan Stanley)

Direct gaming taxes Y15 MOP84.4 billion

-34.5%

McCartney says the trick to pushing Macau forward comes down to the public and private sectors effectively collaborating to ensure there is a consensus on where stakeholders envision the city going. This will lead to a clear branding strategy for Macau which will in turn draw more businesses and associations to its objective.

By getting everyone on board, McCartney says, Macau can move towards attracting much needed leisure visitors. B eing serviced by low-cost carriers, opening more affordable hotels for those not concerned about luxury accommodation, improving its infrastructure and raising the profile of its attractions, will help Macau compete with neighboring destinations.

“I haven’t seen that level [of collaboration] and until I see that Macau won’t move forward in changing its image.”

SJM HOLDINGS (880:HK) Has twenty casinos. Its $3.2 billion Palazzo Versace development is scheduled to come online in 2017. Mass market property, the Jal Alai is being revamped and is scheduled for a mid-2016 opening with 130 rooms and 45 gaming tables. The company is currently

building The Grand Lisboa Palace on Cotai, which is scheduled for completion towards the end of 2017. The casino’s original plans were for 700 gaming tables and over 1,200 slot machines across a gaming floor area of approximately 27,000 square metres.

However, CEO Ambrose So Shu Fai recently said that the company is hoping for 500 to 600 tables.

The resort will feature a Palazzo Versace hotel and a Karl Lagerfeld Hotel and the total production cost is estimated at about HKD$30 billion ($3.8 billion).

SJM in March opened a new gaming area at the Grand Lisboa, which includes 870 square meters of space, with 10 gaming tables and over 40 slot machines as well as a dining area.

In Q1, gaming revenue decreased by 22.8 percent to HK$11.02 billion ($1.42billion), with VIP revenue down 29.2 percent to $5.6 billion, while mass was down 14.9 percent at $5.14 billion. Despite the drop the results were slightly ahead of forecasts.

GALAXY ENTERTAINMENT GROUP (27.HK) Has three main properties and runs three City Club casinos inside hotels. The company’s new Galaxy Macau Phase 2 and Broadway at Galaxy Macau opened on May 27 2015, almost doubling the capacity of the resort. The group was recently granted an extra 100 tables, adding to the original allocation of 150 tables. That’s still far short of the 400 it had requested, but brings it in line with the table award given to Melco Crown Entertainment’s Studio City.

Galaxy Chairman Lui Che-Woo says he will be venturing into family friendly theme parks as part of the next two phases of the HK$86 billion (US$11 billion) Galaxy Macau project. Construction of the third and fourth phases of Galaxy Macau are expected to start this year.

In Q1, quarterly revenue came to HK$13.4 billion (US$1.7 billion), up 1 percent sequentially and down 2 percent year on year. Adjusted EBITDA was HK$2.4 billion, down 2 percent sequentially and up 6 percent year on year. The results were slightly ahead of analysts’ forecasts.

Macau’s Court of Second Instance recently denied an appeal by Galaxy Entertainment for an action against Wynn Resorts regarding the trademarking of its ‘SW’ logo.

GREATER CHINA 9

SANDS CHINA (1928:HK) Has four casinos. The company says its new $3 billion The Parisian, property is still scheduled to open in the third quarter.

The Parisian Macao will feature a scale replica of the Eiffel Tower, nearly 13,000 hotel rooms, two million square feet of retail-mall offerings and two million square feet of MICE capacity.

An air-conditioned walkover bridge with moving sidewalks is also planned, which will connect Parisian Macao to Sands Cotai Central.

In Q1, adjusted earnings were $357.3 million or $0.45 per share, down from $531.1 million or $0.66 per share in the year-ago quarter, missing the $0.63 per share consensus.

Revenues fell 9.8 percent year-over-year to $2.72 billion, missing expectations for $2.88 billion.

Fitch Ratings says it expects revenues and EBITDA to decline by 7 and 10 percent respectively this year. It sees the measures rebounding to 2015 levels in 2017.

Parent company Las Vegas Sands recently settled a lawsuit with its former Macau head, who claims he was wrongfully dismissed in 2010.

MELCO CROWN ENTERTAINMENT (6883.HK) Has three casinos. The company’s $3.2 billion Studio City opened on October 27, 2015, with an allocation of 250 tables, short of the 400 requested. All tables were initially allocated to the mass sector, a first in Macau, but it now plans to open three VIP rooms.

The resort features a 5,000-seat multi-purpose theatre, a permanent magic show, junglethemed river rides, Asia’s highest Ferris wheel and a Batman simulated ride. Melco says the resort will be made up of 95 percent non-gaming components.

Joint venture partner Crown Resorts recently said it would sell down some of its stake in Melco Crown, selling the stock back to Melco for about $800.8 million.

In Q1, results were helped by the Studio City project, but missed expectations. Net revenue was $1.1 billion, representing an increase of approximately 5 percent from 2015, but slightly shy of the $1.14 billion forecast by analysts. Adjusted net income was $40.5 million, or $0.025 a share, compared with $87.1 million, or $0.054 a year earlier.

WYNN MACAU (1128:HK) Has one casino. Its $4 billion Wynn Palace is scheduled to open on August 22 after facing construction delays. It will have 1,700 hotel rooms and 90 percent of the resort will be non-gaming. The company said the resort will feature a performance lake, casino, spa, retail and other outlets. It was aiming for about 500 table games. However, Bernstein Research says it expects the resort will get about 250 in line with the other new openings and will transfer 140 from Wynn Macau.

Analysts say the resort, which will be the most VIP-focused of the new Cotai openings, will be a game-changer for the company.

Morgan Stanley said it will lead the pack in terms of room rates, but may be tempted to cut prices if the occupancy rate is lower

than expected “Consensus expectations of 2017e EBITDA of US$450 - 600 million for Wynn Palace may be missed given soft demand,” said the brokerage.

In Q1, net revenue fell 13.8 percent to $608.2 million. Adjusted Property EBITDA in the first quarter of 2016 was $191.2 million, down 9.9 percent from $212.3 million in the first quarter of 2015. Results topped analyst expectations.

MGM CHINA (2282:HK) Is operating a single casino in the peninsula.

The opening for its new $2.9 billion development, the MGM Cotai, has been pushed back from late 2016 to the first quarter of 2017 because of soft market conditions and the timing of other new openings.

In Q1, MGM China recorded total revenue of HK$3.6 billion, a decrease of 25 percent from a year ago, but narrower than the 31 percent year-on-year decline in the prior quarter.

Adjusted EBITDA was HK$995 million ($128 million), down 23 percent from a year ago. The company said its business was negatively affected by low hold in both mass table games and in-house VIP operations.

Wells Fargo said revenue and EBITDA were about 8-9 percent below the consensus forecast.

Fitch expects the company to post $600 million of EBITDA in 2017, with about $200 million EBITDA at MGM Cotai and an approximately 20 percent EBITDA decline at MGM Macau.

TOURISM ARRIVALS Y15 30,714,628

-2.6%

Overnight visitors

-1.8%

Same-day visitors

-3.3%

May arrivals

-2.8%

Overnight visitors

+3.8%

Asia Gaming Briefings | August 2016

GREATER CHINA 10

HONG KONG

Off to the races with virtual reality, new technologies What do virtual reality, touchscreens and social media have to do with the future of racing? According to experts, it’s this type of technology that could be key to ensuring the “old fashioned” sport of racing keeps up with the times, and as usual the Hong Kong Jockey Club is leading the way.

O

n any given Wednesday night at Hong Kong’s iconic Happy Valley racecourse, horse racing seems anything but a sport in decline.

As a band belts out a cover of “Uptown Funk”, thousands of 20- and 30-something’s groove along. While the Hong Kong Jockey Club’s Happy Wednesday promotion has been an amazing success – midweek crowds of about 20,000 are the norm - a quick look around tells you there are still more beers than betting slips in the hands of the younger spectators.

Engaging a younger demographic remains

Asia Gaming Briefings | August 2016

perhaps the biggest challenge for a relatively arcane sport that, unlike other popular team sports like football and basketball, relies almost entirely on betting revenue for its funding and therefore survival.

Youth initiatives So what are the answers? The Hong Kong Jockey Club leads the way in initiatives aimed at getting young people to bet on their smartphones and ensuring that cutting edge technology is put to use in the battle to keep

racing relevant in the 21st century.

Above the Beer Garden, in Adrenaline nightclub so-called “racing specialists” stand by, to explain to young professionals how to place a bet. Making the task easier is the “ibu” – a billiard table size smartscreen, which the Jockey Club claims is “the world’s largest multi-touch table.” The “ibu” allows users to acquire information related to horses, jockeys, trainers and races as well as to place bets with a stored value electronic card.

At the reception iPads are freely loaned out to use while at the races with the tablets

GREATER CHINA 11

China Morning Post. “That access at the track means all of the information you need is at your fingertips, but just as importantly, it is all represented in a graphical and easy to understand way. And with young people having a short attention span, the club does a great job of keeping young people engaged when most raceclubs around the world aren’t doing that.”

Hawkins also pointed to the use of social media such as Twitter or Facebook.

“They have been exceptional for racing, because firstly racing is a community, and is very niche in its knowledge, and because racing has always thrived on rumour and innuendo – talking about what is happening behind the scenes. It has opened that up to a new group of people that perhaps before didn’t have access to that.”

One Australian race club that has been proactive in its moves to create a more accessible product is the Melbourne Race Club, whose Racing and Media Executive, Josh Rodder has travelled to Asia’s biggest race tracks in search of ideas.

GROSS GAMING REVENUE HKJC Horse racing turnover Y14/15 HKD 107.9b ($13.9b)

+5.8%

Football betting HKD 78.2b

+26%

Mark 6 lottery HKD 7.8b

-1.6%

GGR Y16E -3% to -5%

Virtual tours

containing pre-loaded, easy-to-use apps. The apps include Racing Touch – a form analyzer that connects straight to the Jockey Club’s betting pools – and Racing Simulator, which creates a life-like and interactive display of how a race might play out tactically.

Recently the club even deployed virtual reality headsets in the Beer Garden - allowing fans to feel what it might be like to ride a horse in a race and help them relate to what is happening out on the turf.

Social media “The jockey club tries to stay at the forefront of technology to stay connected with young people,” says Andrew Hawkins, an expert who covers racing for the South

He says fresh ideas, like the use of virtual reality headsets, used at Happy Valley, could be used in numerous ways.

“We could do virtual stables tours, where people get an up close look at what goes into training a horse – anything that can help educate people about the sport in a new and exciting way, that’s what we need,” he said.

The MRC’s famous Caulfield Racetrack is in the process of developing a multimedia room in conjunction with its betting partner Ladbrokes and the MRC also offers an extensive Young Members program, with tours and marquees on big race days.

Rather than seeing racing as a strictly wagering product, Rodder believes racing needs to do a better job of marketing itself as a sport and educating potential fans.

He has also travelled to racetracks in Japan and witnessed firsthand the almost religious devotion of fans there. “You get 50,000 fans surrounding the parade ring before a big race like the Derby – the horses are the stars, as well as the trainers and jockeys. This is where we have lost our way in Australia I think, at least from a marketing perspective.

“I understand we are a turnover model but if we want to connect the younger audience we can’t be ramming the betting in their faces, we need to connect them with the sport.”

HKJC expands partnership with Man. U The Hong Kong Jockey Club has extended its partnership with Manchester United for another four years. Under the new deal, the club’s academy team will play at least one match a year in Hong Kong with the first game expected in summer 2017. In addition academy coaches will fly out to Hong Kong four times a year to oversee its youth program.

Success Dragon scraps bond sale HK-listed Success Dragon International Holdings Ltd., formerly known as the C.Y. Foundation, has dropped plans to place convertible bonds amounting to HK$220 million ($28.3 million). The gaming services firm said it was unable to agree on some of the key commercial terms with the placing agents. It said it will now consider all appropriate means of financing including equity, debt and hybrids.

Asia Gaming Briefings | August 2016

12

SOUTH EAST ASIA

12

THAILAND

Football fever trumps crackdown among Thai youth

The UEFA Euro 2016 soccer championship looked set to fuel a spike in gambling among Thai youth, despite a police crackdown and a government campaign to discourage illegal gambling.

SOUTH EAST ASIA

A

j oint sur ve y conduc te d by Chulalongkorn University’s Centre for Gaming Studies together with the Research Centre for Social and Business Development found that more than 16 percent of Thai youth in major provinces were planning to bet on the championships, which kicked off in France on June 10 and ran through to July 10.

The research center’s director, Thana Hapipat, said the trend towards an increase in football betting was buoyed by greater use of social media and smartphones to lodge bets. “Young people now can play by way of many, many channels,” Thana told AGB. “[Social media] is a great influence on young people. The amount of betting by the youth on social media has increased by about five percent since the World Cup in 2006.”

“For the World Cup a decade ago online betting accounted for just 2 to 3 percent of all bets. Nowadays, that has risen to around 18 percent during the present Euro Cup,” he said, noting the majority of wagers are still being placed through bookmakers or through a group.

No perceived risk Thanakorn Komkris, director of the nongovernment organization, Stop Gambling Network, says based on the survey as many as one million Thai youth had planned to bet on the Euro Football Championship.

“This number makes us very concerned for the Thai youth. They are confident that to bet on football is not a bad thing especially for a team they already support,” Thanakorn told AGB. The survey covered more than 3,800 high school and vocational school students up to age 19. Some 67 percent of respondents said they felt that betting on football, despite being banned in Thailand, was not risky behaviour, adding it required knowledge and analysis.

Also more than 45 percent said that placing a bet on their favorite team was a way to show support.

The survey also found that 60 percent of respondents were unaware of “stop gambling” campaigns and had also not been asked to refrain from gambling.

Thai police had been promoting campaigns calling on people to avoid football gambling and calling on the general public to alert

13

authorities to evidence of betting taking place.

But Thana says the government officials involved in the campaign have been inconsistent towards the crackdown. “We should make [combatting football gambling] important throughout the year, not just at a tournament,” he said.

Thai Deputy National Police chief Pongsapat Pongcharoen is chair of an antigambling police centre launched ahead of the Euro 2016 tournament. Anti-gambling organizations have led a campaign of public safety for people to “refrain from football gambling”.

Some 60 percent of those surveyed said they would spend less than 500 baht -- about US$15 – on a match while nine percent said they would be spending between 3,000 and 5,000 baht [$88 to $145].

Across Asia as a whole, total turnover from betting on the tournament is estimated by industry insiders at about 45 billion euros ($51 billion). The final match alone is expected to attract $1.85 billion euros, with the match average seen at 0.74 billion euros.

Bad debts Nualnoi Treerat, an economist with Chulalongkorn University’s Center for Gaming Studies, said the survey also noted that 30 percent of the youth gamble on the Euro football championships with the hope of winning money.

However a further 30 percent were also gambling in order to make up for losses incurred from betting on the English Premier League. Leicester City, which is owned by a Thai businessman, earlier this year won the Premier League title sparking a football frenzy in the Southeast Asian country.

Academics are concerned that football betting will spread to other types of gambling.

Thailand has faced a long period of debate over whether gambling should be legalized or not. Currently, official gambling is limited largely to the state lottery and horse racing, although studies have estimated some 70 percent of adults gamble on a regular basis.

Debate has increased in recent years over moves to legalize casinos, with several major underground casinos operating both in Bangkok and regionally. But raids on the illegal casinos continue, often implicating local Thai police offering protection.

GROSS GAMING REVENUE Tourism arrivals Y15 29.9m

+20%

OFFICIAL LOTTERY THB 20b ($625m) GOVT. TARGET FOR REFORMED LOTTERY THB 44b UNDERGROUND LOTTERY THB 102b (Source: Chulalongkorn University)

ESTIMATED CASINO TAX REVENUE THB 100b ($2.78 billion) (Source: Rangsit University)

Lottery bill eyed for Fall submission Thailand’s Ministry of Finance is expected to submit a lottery bill which will allow online lottery and require lottery vendors to have licenses. The bill will be ready for submission to the cabinet in September.

In the case of the online lottery, the Government Lottery Office will be required to allocate 23 percent of revenue to the state coffers, with 60 percent allocated for prize money.

Gambling takes lion’s share of Euro 2016 spending The University of the Thai Chamber of Commerce estimated betting spending during the Euro 2016 soccer tournament at THB 58 billion ($1.65 billion), with THB 14.8 billion to be spent on partying and THB 2.38 billion on electrical appliances and satellite television. Overall spending was expected to be down 19.6 percent from Euro 2014 to THB 76.54 billion due mainly to the sluggish economy and lower appliance sales.

Asia Gaming Briefings | August 2016

SOUTH EAST ASIA 14

PHILIPPINES

Betting on island life The Philippines was one of the best-performing casino markets around Asia in 2015, defying the regional slump to post a 17 percent increase in gross gaming revenue. Most of the focus has been on the multi-billion dollar resorts springing up in Manila’s Entertainment City, but industry experts say there’s plenty of opportunity outside of the capital.

T

he pristine beauty of the Philippine islands and the fact that locals are permitted to gamble make for an interesting mix for casino investors.

Mactan Island and Cebu Island have recently received multi-million dollar investments from the likes of the Sino-America Gaming Investment Group and SM Group. While the Aurora Pacific Economic Zone and Freeport Authority (APECO) now has the power to grant land-based and online casino licenses independently of PAGCOR. Growth potential Then there’s Clark Special Economic Zone, a former US Air Force base turned tourism and entertainment complex with casinos including the Royce, Casablanca, Widus, Midori and Mimosa. The majority of casinos, existing and new, are aimed at regional gamblers and tourists, but some have been built with the local market in mind with Bloomberry Resorts investing $40 million in a new resort project in Quezon City. The chunky investments – SinoAmerica is putting $1 billion into Mactan Island and SM Group $300 million (the smallest investment required by PAGCOR for casinos outside of Manila) into Cebu – prove operators are confident in the longterm potential of regions outside of Manila and Entertainment City.

But challenges still remain: “Land acquisition, deal structure, and securing all the necessary endorsements are amongst the most complex issues in the Philippines,” says Michael Foxman, chief executive officer of RiskWise Group. “Then, of course, you have to ensure the location is suitable for the desired project - there’s very little ideal land available in the country. Mactan Leisure City, for example, is situated within a community not seen as lucrative gambling customers,

Asia Gaming Briefings | August 2016

and that’s why operators there are focused on attracting the tourism dollar,” he adds.

For operators looking to establish a longterm, sustainable income from gambling, capturing the tourist dollar will be key. However, experts predict that up to 80 percent of resort revenue will come from domestic tourism, with just 20 percent coming from international visitors. Political tensions between Manila and Beijing have made mainland travellers wary of the Philippines, while security concerns are also a deterrent.

That said, international visitor numbers have risen of late, up 11 percent year-on-year in April to 471,598 and even the Chinese are returning to the country – from January to April a total of 238,523 Chinese tourists visited.

This uptick has helped investors raise the required capital to push ahead with their projects.

Mactan Island and Cebu Of all the areas primed for gambling growth, Mactan and Cebu are most likely to deliver in the short term with PAGCOR understood to be on the verge of issuing the jurisdiction with a gambling permit in the coming months.

When it does, plans for Mactan Entertainment City – located in Cebu – will break ground.

Once complete, the development will consist of three luxury hotels, as well as an entertainment complex that will include a full-scale casino, shopping and dining and a conference facility.

The project has been developed by RiskWise with funding – set to top $1 billion – from the Macau Resources Group.

“We are focused on Mactan Island as this territory conforms with our profile of an integrated resort casino,” says Foxman.

“We also see an opportunity to enhance the Asian gaming footprint in a beautiful tourismoriented destination that’s accessible from numerous countries.”

Mactan and Cebu are certainly primed for such development. There’s an international airport on the island with regular flights to major Asian cities such as Singapore, Hong Kong and Manila, and the area already has the infrastructure required to deliver tourists to the various five-star beach-front hotels – including Shangri-La, Plantation Bay and Bluewater Maribago Beach Resort that have already popped up. More importantly, it has the investment and setup needed to accommodate the major uptick in visitor numbers that will likely occur once Mactan Entertainment City has been built.

Clark Special Economic Zone Clark offers many of the same opportunities as Mactan-Cebu; built on the site of a former US Air Force base it has been recently updated to become one of the most modern airports in Asia. Further expansion is currently taking place in order to turn Clark into the

SOUTH EAST ASIA 15

GROSS GAMING REVENUE Y15 PHP 130b ($2.75b)

Y16E

+17%

$2.9b

Y20E

$5.8b (Source: Pagcor)

Y16E VIP revenue Y17E VIP revenue

+18% +16% (Source: Morgan Stanley)

Thunderbird Resorts begins expansion Thunderbird Resorts & Casinos is in expansion mode, recently holding the ground-breaking for an additional 47 villas. It also opened new food and beverage outlets. With the latest additions to the 65-hectare property, the resort aims to strengthen its support to the tourism of the North, particularly in the province of La Union. Thunderbird is situated on the west coast of Luzon island, north of Manila.

international gateway to the Philippines.

The area already has an established casino and gambling industry, with some operators – Widus and Royce – currently mulling expansion plans. And while Clark lacks the white sandy beaches and crystal clear waters of Mactan-Cebu, it’s numerous golf courses and entertainment facilities are still a major draw for visitors and tourists.

But for the area to grow further, argues Joe Pisano, CEO of Jade Entertainment and Gaming Technologies, there needs to be an “increase in the number of international flights landing at Clark.” The airport currently receives flights from Singapore, Macau, Hong Kong, Kuala Lumpur and Qatar but that should increase once the airport expansion masterplan is completed in 2025, with capacity increasing to 80 million passengers a year via four terminals and three runways. What’s more, a high-speed train network will link Clark to Metro Manila, giving visitors and tourists another route to the area.

Complement or compete?

Both jurisdictions offer serious untapped potential for casino and gambling operators.

With their close proximity to international airports and decent infrastructure they could easily compete with Manila as entertainment Meccas – at least on paper. But drawing players away from Entertainment City will be no easy feat. Pisano, however, argues that operators in Clark and Mactan-Cebu do not see themselves as competing with those in Manila, rather working with them to offer customers more gambling options.

“Entertainment City casinos work with regional integrated resorts to provide tourism options to their customers, places with white sand tropical beaches, golf courses, and other activities.” Foxman agrees: “This industry is about building customer loyalty. We don’t envision competing, what we will do is provide greater options for travellers to visit other areas outside of Manila.”

Customer loyalty is at the heart of any successful casino operation. As is their satisfaction. If operators are able to offer players more gambling options in different locations around the Philippines, their loyalty will only strengthen. There are major challenges in building integrated casino resorts in these new jurisdictions, but if developers and operators are able to make all of the pieces come together the potential is huge.

SOLAIRE RESORT & CASINO Solaire is a 16-hectare gaming and integrated resort complex along Asean Avenue in Parañaque City owned by Bloomberry Resorts. Bay Tower of Solaire consists of a casino with an aggregate gaming floor area of approximately 18,500 square meters (including approximately 6,000 square meters of exclusive VIP gaming areas), with approximately 1,400 slot Asia Gaming Briefings | August 2016

SOUTH EAST ASIA 16

PAGCOR stalls on processing of online gaming licenses Philippine Amusement and Gaming Corp is temporarily halting the processing of all online gambling license applications following incoming President Duterte’s pronouncement against online gambling.

Duerte vowed to put an end to online gambling in the country, hours after taking an oath for presidency, saying he will direct PACGOR chief Andrea Domingo to rescind licenses that have been issued for online gambling “sometime” soon.

machines, 295 gaming tables and 88 electronic table games. Bay Tower has 488 hotel rooms and 15 specialty restaurants. Contiguous to the existing Solaire Resort and Casino, the Sky tower consists of a 312 all-suite hotel, additional ten VIP gaming salons with 66 gaming tables and 223 slot machines. It also includes a certified 1,760-seat lyric theatre.

Bloomberry Resorts reported a net loss of PHP 1.2 billion in 16Q1, compared to a net loss of PHP 533 million in the same quarter in 2015.

Total revenue was down 10 percent year on year, at PHP 5.7 billion for the quarter, compared to PHP 6.3 billion in 2015, while gross gaming revenue for the period was down 5 percent to PHP 7.7 billion. The group recently said it would sell its casino property on Jeju Island in South Korea.

CITY OF DREAMS The $1.3 billion City of Dreams Manila is owned by Belle Corp and Melco Crown Entertainment’s local unit. The grand opening was held Feb. 2 last year.

For Q1, the company reported revenue of $95.4 million compared to US$52.7 million in the comparable quarter. Adjusted EBITDA was $28.6 million compared to US$2.9 million, primarily as a result of increased casino revenues, including from the junket operations which began in the middle of 2015.

Rolling chip volume totaled $1.5 billion for the first quarter of 2016 versus $185.5 million in the first quarter of 2015.

PAGCOR has approved the operation by City of Dreams Manila of up to a maximum of approximately 380 gaming tables, 1,700 slot machines and 1,700 electronic table games.

Asia Gaming Briefings | August 2016

As of December 31, 2015, City of Dreams Manila had 261 gaming tables, 1,579 slot machines and 83 electronic table games in operation.

City of Dreams Manila has six hotel towers with approximately 950 rooms in aggregate, including VIP and five-star luxury rooms and high-end boutique hotel rooms, a wide selection of restaurants and food & beverage outlets, a 4,612.44 square meters family entertainment center in collaboration with Dreamworks Animation, a live performance stage, two international nightclubs and a multi-level car park. It includes an approximately 260 room Crown Towers hotel, Hyatt City of Dreams Manila, a 365 room hotel managed by Hyatt International Corporation and Asia’s first Nobu Hotel with 321 rooms.

RESORTS WORLD MANILA Travellers International Hotel Group, a joint venture between Genting Hong Kong and Alliance Global, is the owner and operator of Resorts World Manila. It reported net income at PHP 1.2 billion for 16Q1, down 33.5 percent year on year.

Revenues amounted to PHP 6.6 billion for the three months ended March 31, 2016, compared to PHP 7.6 billion for the same period in 2015. Gross gaming revenue was down to PHP 5.6 billion in the quarter, from PHP 6.8 billion in the same period in 2015.

The company is planning to spend about PHP 8 billion - PHP10 billion this year on the construction of Phase 3 of the resort.

Travellers president and CEO Kingson Sian recently said that Phase 3 will include a casino, retail stores and three hotels with a total of 14,000 square meters of gaming facilities and

3,200 square meters of retail stores.

Sian also added that Phase 2 will be completed in September, with 228 new hotel rooms for Marriott Hotel Manila’s west wing plus additional entertainment areas in Remington Hotel. The company is aiming for at least 3,500 hotel rooms by 2018.

PAGCOR has approved new gaming capacity of 420 gaming tables and 4,148 gaming machines at the resort.

However, the company said it has delayed the opening of a second Manila resort, the $1.1-billion Resorts World Bayshore along Manila Bay to Q4 2020 due to oversupply in the market. It had been aiming for a 2018 opening.

MANILA BAY RESORTS Tiger Resorts and Entertainment, the Philippine unit of Japan’s Universal Entertainment, is now scheduled to open its Manila Bay project in November 2016, more than a year later than originally planned.

The company has said it may invest as much as $4 billion. Once fully operational, the newly named Okada Manila, would feature two luxury hotels, a 30,000 square meters casino floor with 3,000 slot machines and 500 table games, as well as a number of dining, leisure and entertainment options. It will include an indoor manmade beach and club covered by a huge glass dome, high-end and casual dining restaurants, upscale retail shops, trade halls and cinemas.

Tiger President Steve Wolstenholme has said the resort, which will feature a huge fountain as its centrepiece, aims to provide Manila with a must-see icon, as well as retail options not yet available in the Philippines.

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GROSS GAMING REVENUE

MALAYSIA

Y15 Tourism arrivals 25.7m Receipts RM69.1b

-6.3%

+4%

Y16 target arrivals 30.5m Y16 receipts target RM103b

Genting gears for tourism plan rollout Genting Malaysia, the country’s only casino operator, is ramping up preparation works as it prepares to begin rolling out the first stages of its RM10.38 billion ($2.46 billion) Genting Integrated Tourism Plan for the second half of this year.

T

he company, which has said that it expects the economic environment to be challenging in 2016, is forecast to open its Sky Avenue & Sky Plaza shopping malls, and a new cable car station progressively by end 2016. However, its much touted Twentieth Century Fox World theme park has been delayed to late 2017.

According to analysts at AllianceDBS Research, the firm has obtained regulatory approvals for a new casino at Sky Plaza, though management has only provided minimal details on the additional gaming capacity obtained.

In Q1, Genting Malaysia’s reported profit fell by 55.4 percent to RM161.6 million mainly due to unrealized foreign exchange losses. Revenue gained 6 percent.

Outlook cautious “Stripping out this and other exceptional items, the core profit dropped by only 8.3 percent YoY to RM324.5 million, which accounted for 30 percent of our full-year forecast and 24 percent of consensus estimates, TA Securities said in a note.

Management has said that the Malaysian economy is slowing, with consumer spending hurt in particular by the introduction of a Goods and Services Tax in April last year. The group maintains “a cautious stance” on the near term outlook for the gaming industry given the regionwide headwinds facing the VIP sector, but says it continues to be positive in the longer term.

Asia Gaming Briefings | August 2016

Genting said it expects to incur an increase in pre-opening expenses in coming months as it ramps up construction work, but gave no further details.

Analysts say Genting’s mass market base will help to cushion the company from the worst of the problems facing some other jurisdictions and concur that the GITP will be one of the main catalysts for future growth at the operator.

“Based on our forecast, mass/ premium mass players will continue to contribute 55 percent of the revenue,” Morgan Stanley said in a note. “Currently, 70 percent of Genting Malaysia visitors are day- trippers and this could increase with the new cable car system,” which was scheduled to open in June.

“We forecast 15 percent EBITDA CAGR for Genting Malaysia in 2015-18e, on the opening of GITP facilities starting 3Q16,” it added.

Genting Malaysia revenue Q1 RM1.18b

+6%

Berjaya losses widen Berjaya Corp Bhd said fiscal Q4 losses widened to RM368.9 million ($92.5 million) from a loss of RM275 million in the same quarter in 2014, due mainly to non-cash goodwill impairment charges.

The operator also said it incurred losses in the quarter ending April 30 from its toto betting operations, operated by its subsidiary Sports Toto Malaysia Sdn Bhd, which reported lower revenue.

Johor police nab Euro 2016 syndicate Police in the state of Johor smashed a Euro 2016 gambling syndicate worth RM3.5 million in 25 raids from June 10, according to local media reports. A total of 27 men were arrested in the raids. They were believed to be agents who were authorized to accept bets of up to RM2.6 million each for the syndicate. Malaysian police, like authorities elsewhere in the region launched crackdowns to stamp out illegal betting on the soccer tournament.

GITP stock boost The lead up of the opening of GITP facilities may also boost the company’s stock price, said the brokerage. “As GENM is less reliant on VIP, its shares could see a rally similar to other openings as attractions are progressively opened from 3Q16.”

Meanwhile, Fitch Ratings has affirmed Genting Berhad’s Long-Term Foreign-Currency Issuer Default Rating (IDR) and unsecured rating at ‘A-’, also pointing to the stable performance of the mass business.

Earlier this year, the company said it was

doubling its investment in the GITP, which is designed to overhaul ageing facilities at the resort, with the addition of new hotel capacity, shopping and tourism facilities.

The capital investment under Phase 1 of the GITP will increase from RM4 billion to RM8.11 billion. Under this phase, the first-ever branded Twentieth Century Fox World theme park will see a substantial increase in investment which is now expected to exceed RM2 billion.

Genting is targeting 30 million visitors by 2020.

SOUTH EAST ASIA 19

SINGAPORE

Casinos eye non-gaming for growth as VIP market drags Las Vegas Sands says it may seek to add another hotel tower at its iconic Marina Bay Sands property, as Singapore’s operators seek new catalysts for growth.

B

oth Marina Bay Sands and Genting Singapore reported weak Q1 results, mostly due to a downturn in their VIP business. Like Macau, China visitation has been hit by Beijing’s anti-corruption drive, but that has been compounded by a strong Singapore dollar, which has affected traffic from its Southeast Asian neighbours.

Singapore gets about half of its VIP revenue from mainland Chinese players, while tourist arrivals from Indonesia and Malaysia fell 10 percent and 5 percent respectively last year.

The island state also does not have junket operators, which has lead to significant exposure to bad and doubtful debts.

“In Singapore account receivables have been falling, but bad debt provisions remain elevated,” Morgan Stanley said in a recent note.

MBS provisions for doubtful debt stood at 23 percent of VIP revenue in Q1, while Genting provisions are likely to be about 24 percent of VIP revenue in 2016, little changed from the 27 percent reported in 2015.

Mass focus Genting has been taking action to tighten its credit policies and deal with bad debts, but of the two operators it is seen as being in the weaker position.

“Aside from capital allocation, the unwinding of non-performing gaming credit has taken longer than expected, and this issue may not be fully resolved until the end of 2016, putting pressure on profitability and cash flows,” ,said Bernstein in a recent note commenting on its decision to downgrade the company from outperform to market perform. “Meanwhile, tightening credit to high rollers further suppresses VIP revenue, and Genting faces strong competition from Marina Bay Sands in the mass segment,” it said.

GROSS GAMING REVENUE Y15 $4.8b

-10%

Y16E (Fitch)

0%

Y16E VIP revenue

-10%

Y17E VIP revenue

As a result of difficulties in the VIP business, both resorts have been focusing on the mass market, which has proved more resilient in the downturn. Marina Bay Sands has extensive MICE facilities, whereas Genting Singapore owns the Universal Studios theme park, as well as the S.E.A. Aquarium.

However, in Singapore’s tightly controlled gambling environment, with space at a premium, the options for further expansion may be limited.

Expansion plans Sands Chairman Sheldon Adelson said recently that the company wants to add another 1,000-1,200 rooms in a new tower at Marina Bay Sands, along with an entertainment arena.

He said the company is currently awaiting to hear about the price of land before making a decision, but if it gets the go ahead it could begin working on designs before the end of the year. The new tower would have a similar design, with a rooftop pool, but wouldn’t be connected to the existing towers.

L ast year, rival operator Genting Singapore opened its new hotel in Jurong, helping add capacity, especially at the mass end of the market. To add to its non-gaming attractions, earlier this year it opened its new Curate restaurant. The 62-seat venue plans to host Michelin-starred chefs from around the world.

Genting Singapore reported Q1 net profit fell 83 percent year on year to S$10.8 million (US$7.9 million), due to higher foreign exchange losses, higher bad debt provisions, finance and other costs.

Results were below analyst expectations, due to “owing to greater-than-expected bad debt provisions”, said Union Gaming.

However, ratings agency Fitch noted that the adverse developments were partially offset by the relatively stable performance of its mass business.

+12% (Source: Morgan Stanley)

TOURISM ARRIVALS Y15 15.2m

+0.9%

TOURISM SPENDING Y15 $22b

-6.8%

Genting dissolves U.K. unit Genting Singapore has announced it has dissolved Palomino Sun (UK) Limited, the company’s wholly-owned subsidiary which was engaged in gambling and betting activities. The subsidiary was placed under voluntary liquidation last year.

Smartphone cheat gets 22 months in jail Czech national Radoslav Skubnik was sentenced to 22 months in jail after using a smartphone to record gaming machines to predict the next mass payout. Skubnik, who was working with two accomplices, admitted to three charges of cheating at Resorts World Sentosa and Marina Bay Sands.

Asia Gaming Briefings | August 2016

NORTH ASIA

20

RUSSIA

Gambling zones struggle with red tape, poor locations Despite the high-profile launch of Summit Ascent’s Tigre de Cristal in Primorye last year, Russia’s gambling zones appear to be struggling.

Samoil Binder, Deputy Head of the Russian Association of Gambling Business, called the situation “deplorable.”

NORTH ASIA

R

21

ussian President Vladimir Putin banned gambling in Russia in 2009 except in four designated gambling zones that were subsequently expanded to include Sochi and the recently annexed Crimea.

However, experts say the remote location of the areas, far from major population centres such as Moscow and St. Petersburg, and a lack of infrastructure have been major factors in holding back development.

Instead, illegal gambling is flourishing.

According to a survey carried out by the Russian Association of Gambling Business, 85 percent of gamers said they would continue to play in Moscow, despite the ban.

Azov closure Russia’s oldest operating gaming zone - Azov City - is now set to close by 1 January 2019, according to a recent presidential decree. Its three casinos received about 500,000 visitors in 2015, while their tax revenue transferred to the regional budget amounted to 230 million rubles (about 3.5 million dollars at the current exchange rate), according to local officials.

Some experts say that Azov City has fallen victim to the authorities’ decision to use the venues constructed for the 2014 Sochi Olympic Games in neighbouring Sochi as casinos.

According to Russian law, two zones cannot co-exist in one region.

Despite the imminent closure Merkur Gaming has announced the placing of Avantgarde SLT slot machines at the Shambala Casino in Azov City, which was recently expanded.

Yuriy Tkach, CEO of Casino Shambala expressed his optimism the government would reconsider the closure. “We are hopeful that a lot can change between now and then.”

GROSS GAMING REVENUE CHINA TOURISM ARRIVALS PRIMORYE JAN TO MAY 38,000, +20,000 Q1 CHINA ARRIVALS +80% TIGRE DE CRISTAL ROLLING CHIP TURNOVER Nov Dec Jan Feb

HK$ 258,197 ($33,296) $312,277 $355,055 $382,412 (Source: Summit Ascent)

But if the shutdown of Azov City is settled, the timeframe for opening its rival in Sochi remains an open question. Last year, there were reports from high-profile officials claiming that it might be opened in summer 2016. However, in May the local authorities told web portal Kuban 24 that this issue is “being worked out” and that it is the Russian government that should make a final decision.

Crimea crumbling Plans for a zone in Crimea have also been pushed back. Its head Sergei Aksyonov recently said that the Crimean government is in talks with two potential investors, whose names he did not reveal. However, he said the launch has been hindered by legal red tape, including the fact that the facility must be located outside of a populated locality.

The head of the Yalta city administration Andrei Rostenko told journalists that it is unlikely that the project will be implemented by the end of 2016, and mentioned the end of 2018 as the more preferable timeframe. The area of the Zhemchuzhina (Eng: Pearl) health camp has been approved as the location.

Binder pointed out that in Crimea there is “no money, water, electricity supply has only recently been fixed with the help of Russia, there is no infrastructure as of now.”

When it comes to Siberian Coin, the management of its only casino - Altai Palace - has recently unveiled plans to build a second property there by 2018. However, if the Russian government slaps a hefty tax on gambling business, it promised to reconsider its decision.

In 2015, Altai Palace received 17,000 players and paid about 30 million rubles to the local

budget. But Binder claims the resort has not lived up to expectations.

International interest The development of Russia’s far eastern gambling zone Primorye has been the one that has generated the most interest amongst international investors, due to its proximity to northern China and its highly favorable tax structure.

However, since the opening of the Tigre de Cristal in November last year, the pace of development has been relatively slow.

In its annual report, Summit Ascent said that it continues to work to ramp up the property, which is the biggest integrated resort in Russia.

It expects to be fully operational by this summer, with 1,100 employees and the company said it has been encouraged by month-on-month gains seen over the winter season.

Diamond Fortune Holdings Prim is working on a second resort, the Selena complex, that will take up to 10 hectares of land with an investment of $900 million. The first phase will include a four-star hotel with 250 rooms, a casino with 100 tables and 500 machines as well as restaurants and bars. Construction began last summer.

Once fully complete by 2020, the Selena will include two hotels, 515 gaming tables and 2,590 machines.

Hong Kong-listed Nagacorp, the operator of Cambodia’s Nagaworld, also began work on its casino in the zone last summer. The company has been preparing foundation work for the future hotel complex with a casino and an aqua park, with a pledged investment of not less than $350 million. The company plans to go ahead with the construction by the end of June 2016 and to launch its facility by the end of 2018.

Criminal penalties for illegal gambling Russia plans to introduce criminal sanctions for unlicensed gambling outside of official zones.

Currently, unlicensed gambling is punishable by administrative fines and seizure of property.

Under the new bill, unlicensed gambling will be punishable with fines up to 500,000 rubles (US$7,600), compulsory community service for up to 240 hours, supervised release for a term of up to four years or imprisonment for up to two years.

Government eyes Primorye tax windfall Russian authorities are expecting tax revenue at the Primorye Integrated Entertainment Zone to reach RUB165 million (US$2.5 million) in 2016, and RUB 700 million annually by 2022. Hotel rooms are expected to rise from 121 rooms to 1,500 in 2019 and 6,500 by the end of the project.

Asia Gaming Briefings | August 2016

NORTH ASIA 22

SOUTH KOREA

VIP spending recovers, Japanese growth strong After a disappointing year for South Korea’s foreigner-only casino operators in 2015, this year appears to have got off to a better start, though analysts remain cautious.

A

ccording to Morgan Stanley, the total drop for Q1 2016 was 14 percent higher than it had been expecting.

The pace of decline from Chinese VIPs has decelerated year-on-year, while it showed an 11 percent improvement from the prior quarter, the investment house said.

Adding to that was the bigger-than expected growth in Japanese VIP drop, which gained 11 percent helped by a shift in focus among operators

Asia Gaming Briefings | August 2016

to attract more high rollers from outside of China and an appreciating yen. VIP drop accounts for about 80 percent of the total, it said.

However, Morgan Stanley notes that it doesn’t expect the pace of the current rally to be sustainable unless Beijing scales back its anti-corruption drive, or there is some kind of structural change that would allow mainland VIPs to bypass the restrictions.

South Korea’s foreigner-only casino

operators were hit hard in 2015, as China’s anti-corruption drive as well as an outbreak of Middle Eastern Respiratory Syndrome caused a slump in visitor arrivals. As a result, a strong field of bidders who had initially expressed an interest in two licenses to operate integrated resorts in the country dwindled. In the end, Seoul chose to award just one license to a consortium led by U.S. tribal operator Mohegan Sun.

NORTH ASIA 23

Islands,” said the casino operator.

“Bloomberry has had a difficult experience operating in Korea, which ultimately resulted in this sale agreement, as well as the company pulling out of the Incheon RFP process last year,” said Union Gaming in a note.

Earnings drag Morgan Stanley also said it viewed the sale as positive, as Jeju Sun has been a key drag on Bloomberry’s earnings since acquisition.

The company announced in March last year, it was buying the Jeju property and other assets in a push to expand outside of the Philippines.

According to its 2015 financial statement, the group acquired Jeju Sun for P2.5 billion ($53.7 million). It also agreed to buy the 20.96 hectares (51.79 acres) Silmi Island covered by the Incheon Free Economic Zone west of Seoul and in January agreed four deals with landowners on Muui Island.

Genting Singapore on the other hand is increasing its holding in a property under development on Jeju, saying it will acquire a further 15 million new ordinary shares.

Genting and property developer Landing International are building Resorts World Jeju, a $1.8 billion development in south-west Jeju, scheduled to open in late 2017.

In good news for the eight incumbent casinos operating on the island, the South Korean national government recently rejected a call for higher taxes in Jeju.

Jeju reshuffle Much of the most recent activity in South Korea has been focused on the southern island of Jeju, known as a local honeymoon destination.

The Philippines’ Bloomberry Resorts is scaling down its bet on South Korea, announcing recently it will sell its Jeju property for about $102.3 million, a little over a year after it first acquired the resort. The operator of Manila’s Solaire Resort & Casino will instead focus on its investment in Silmi and Muui Islands.

Macau junket investor Iao Kun Group Holding will buy the stake in Golden & Luxury Co. - the owner and operator of the Jeju Sun Hotel & Casino.

“Iao Kun desires to enter into the Jeju market and is confident that it can attract its Chinese VIP customers to Jeju Island. Solaire Korea, on the other hand, intends to focus its effort on the development of its property in Muui and Silmi

Tax relief The rejection of the gaming policy package, which included a doubling of the tourism tax (GGR tax) to 20 percent, the implementation of 3-year license renewal audits and restrictions on the transferability of casino licenses is especially positive for Genting, which plans to open Resorts World Jeju in late 2017.

According to Union Gaming analysts, the national government likely rejected the package so as not to scare off billions of dollars of IRrelated capital in the region.

However, the Jeju government has made moves to increase the effective tax rate regardless, said the brokerage.

“Specifically, Jeju is phasing out the ability for casino licensees to pay taxes on GGR after deducting junket commissions.” Union Gaming estimates this will cause the effective VIP GGR tax to more than double to 10 percent, up from 4 percent under the old scheme.

FOREIGNER-ONLY GGR Revenue Y15 $1.13b

-18%

VIP revenue Q1 Y16 Y16E total drop

-1% +11% +15%

Y16E VIP drop

(Source: Morgan Stanley)

Lottery sales Y15 KRW3.26 trillion ($2.7 billion)

+6.8

LVS revives Korea plan Las Vegas Sands executives recently visited the port city of Busan to evaluate potential sites to establish an IR, according to local media reports. The group also held an investment strategy meeting with the Busan Metropolitan City government, said the media outlet.

Sands has been eyeing the South Korean market for some time, but wants rules banning locals from gaming to be eased.

Tax revenue from gaming up 4 percent in 2015 Tax revenue from the gambling industry rose 4 percent year-on-year in 2015 to KRW 2.4 trillion ($2 billion), according to Korea’s National Gambling Control Commission. Tax revenue from casinos went up 12.1 percent, while that of horse racing marginally increased by 1.6 percent. Overall sales were up 3.1 percent on-year to KRW 20.5 trillion.

Asia Gaming Briefings | August 2016

24

INDOCHINA

24

CAMBODIA

VIP outperforms, though locals shadow looms

Cambodia is benefiting from the downturn in Macau and is likely to be the best-performing VIP market in the world in 2016, according to a report from Morgan Stanley.

Asia Gaming Briefings | August 2016

INDOCHINA

T

25

he brokerage expects the VIP market in the country to gain 39 percent this year to about $309 million, after a 23 percent jump in the first quarter of this year. That pace far exceeds the 18 percent growth forecast for the Philippines, 13 percent for Malaysia and 5 percent for Australia and New Zealand.

Lower tax rates, better junket commissions, improved transportation links and an increase in visa-free travel have all helped other destinations outside of Macau to gain traction amongst VIPs, the firm said.

Many countries, Cambodia included, are also starting from a much lower base so growth trajectories are steeper.

Efforts to improve the quality of the offering and boost ties with junkets have been helping the country’s main operator NagaCorp, while the border casinos continue to thrive on a mix of booming proxy betting and a steady stream of visitors from neighboring Vietnam or Thailand, where locals are not allowed to gamble.

Construction to improve NagaCorp’s NagaWorld casino in Phnom Penh is proceeding and the expansion is likely to provide a catalyst for further growth, analysts say.

“We expect continued strong volume trends in 2Q16 and have a decidedly positive outlook on 2H16 and beyond, including the forthcoming openings of NagaCity Walk and Naga2,” Union Gaming wrote in a recent report after conducting a site visit.

Union Gaming said it was particularly encouraged by the significant construction

GROSS GAMING REVENUE Q1 VIP revenue $81m

+23%

Y16E $309m

+39%

Y17E $323m

+4% (Source: Morgan Stanley)

CASINO TAX COLLECTION Y15 $34.7m

+33%

progress on Naga2, which may have a 2H17 opening. The new development is said to include more than 1,000 hotel rooms, up to 300 gaming tables and 500 electronic gaming machines.

In addition, NagaCity Walk, a shopping complex connected to NagaWorld Casino is also likely to be operational in 2H16, said Union Gaming. The new development will add a much needed upscale retail offering, which should help boost premium play at the property and more foot traffic in general.

“

LOWER TAX RATES, BETTER JUNKET COMMISSIONS, IMPROVED TRANSPORTATION LINKS AND AN INCREASE IN VISAFREE TRAVEL

”

Union Gaming said it was adjusting its 2016 estimates slightly downward for the company however to reflect “bad luck” in the first half of the year, though they believe “there is more upside risk than downside from here…”.

Analysts from CMS (HK) said NagaWorld is welcoming 5,000 in traffic currently, which is expected to increase by 1,000 when dutyfree shops open in August. Apart from the size increase, Phase 2 is likely to enhance the quality of hardware, which could attract more foreign high-end players. So far, 70 percent of NagaWorld’s VIP clients are from Malaysia as Macau junket business is still ramping up, CMS said.

In Q1, Naga posted a 35 percent increase in gross gaming revenue to $153.8 million, with the VIP roll spiking by 65 percent.

Mass table buy-ins were up 15 percent to $149.8 million.

However, the decision by Vietnam’s government to consider opening the market to allow its residents to gamble is casting a shadow. The biggest impact is likely to be felt on the border casinos, but analysts say NagaWorld may also take a hit.

Citi estimates that Vietnamese make up about 10 to 20 percent of Naga’s mass players.

However, given that some of that traffic comes from Vietnamese already living in Phnom Penh and the fact the players’ average wealth is lower than those from Korea or China, the likely impact will be a 5-10 percent hit on Naga’s mass and slot volumes if/when the draft becomes law, it said.

Along the borders, the situation may be very different.

Lim Kim Seng, chairman of the Lucky89 Group, told the Phnom Penh post that his two border casinos “will face a lot of challenges to remain profitable” if Vietnamese punters can gamble in domestic casinos.

Dream Win and Cootel team on online lottery Cambodia telecom company Cootel has launched a new legally-registered online lottery in cooperation with Dream Win company. The lottery, named Khmer Lottery was registered with the Ministry of Economy and Finance in December last year with an investment of $5 million, according to Pich Chetra, executive director of Khmer Lottery. Khieu Sopheak, the Ministry of Interior’s spokesman, said the business had the support of the ministry.

Entertainment Gaming inks deal for EGM sale Entertainment Gaming Asia plans to sell all 670 of its electronic gaming machine (EGM) seats placed at NagaWorld Casino to a third-party in Cambodia for US$2.5 million. The company had leased the EGMs to the casino and that arrangement has been terminated.

Asia Gaming Briefings | August 2016

INDOCHINA 26

VIETNAM

Casino bill moves forward, lifting locals ban Vietnam’s long-delayed draft casino bill has finally been submitted to the government in a move many in the industry say will be a game changer for the country’s gambling industry.

T

he decree, which has been seven years in the making, will allow Vietnamese locals access to casinos for the first time. This has long been seen as a key factor needed for large-scale international investor interest.

“We hope that this will be the last draft, already we have seen a lot of revisions before its submission in June,” Nguyen Huy Dat, deputy director of the Ministry of Finance’s (MoF) Lottery and Gambling Division, was cited by local media as saying.

As expected, the latest draft also cuts the minimum investment requirement in half to $2 billion, with a condition that disbursed capital must reach at least $1 billion. That figure may still be considered high for Asia’s emerging markets.

The report gave no timetable for the next step for the bill, though the news it has finally been submitted took some in the industry by surprise, as there had appeared to be no imminent end to the regulatory deadlock.

The Vietnamese government wants any new casinos to be sited in integrated resorts (IRs) in keeping with the official view that these developments are for general tourism, conferences and business meetings and don’t have an overwhelming focus on gaming. For the moment that also means not permitting casinos in central Hanoi or Ho Chi Minh City.

Investors circling Despite the slow-moving regulatory progress, some projects have been moving ahead. The 541-room Grand Ho Tram Strip, which opened in July 2013 as the first of five resorts planned for the beachfront strip two hours from Ho Chi Minh City, is now in expansion mode.

The resort recently signed a memorandum of understanding with Cotec Construction to cooperate on a $75 million expansion of the integrated resort complex. The MOU adds a further 559 rooms, increasing the total capacity at the resort to 1,100 rooms.

Building has also begun on a development in the south on Phu Quoc island, but no government approval has yet been granted for

Asia Gaming Briefings | August 2016

gaming, while Sam Sheng, managing director of Double Square Consulting (Macau), said he is currently scoping sites for a gaming property on behalf of private investors.

Scaled down expectations Sheng said in an interview at G2E Asia in Macau that in his view, the optimal investment size for the Vietnam market under current conditions would be about $250 million, a far cry from the $4 billion initially mooted by the government.

The $500 million Hoi An development in central Vietnam, which has a target opening of early 2019, is proceeding as a foreigners-only development between Hong Kong’s Chow Tai Fook and Macau junket operator Suncity with local partner VinaCapital.

If the ban on locals gambling is lifted, the resort is seen as a key beneficiary as the area is a playground for wealthy Vietnamese.

Bigger picture?

Smaller casinos that were operating before the steep capital investment and IR rules were put in place appear to be thriving with their focus on niche audiences, although experts note that the headline GGR figures may not reflect the full story.

The foreigners-only Crowne International Club in the beach resort of Danang was said to be generating an eye-popping $9 billion per quarter in rolling chip revenue according to reports. The casino enjoys strong links with Macau with four flights daily into the city’s airport only 12kms away.

But Global Market Advisors’ Shaun McCamley questioned whether that business model is sustainable in the current climate: “The current anti-corruption drive is strictly enforced in China so no valuable players are sticking their heads up and travelling. The other big issue, whether you are a first- or second-tier, is the difficulty in collecting loans. Some are saying as much as 90 percent is now uncollectable.”

He added: “Unless a casino operator is willing

FOREIGNER-ONLY GGR Aristo interim EBITDA $7.79m

+59%

Normalized GGR $35.43m

+23%

TOURISM ARRIVALS Jan/June 4,706,324

+21.3%

June arrivals 700,446

+29.8%

YOY GAMING TAX 35% (COMMISSIONS DEDUCTIBLE)

Success Dragon drops Danang purchase Hong Kong-listed Success Dragon International Holdings has terminated an agreement to acquire a stake in a 5-star hotel in Danang, Vietnam. The gaming services firm in April said it would acquire a 45 percent interest in the One Opera Danang Hotel for $14.1 million. The deal was also to include the electronic gaming machine club operated within the hotel.

Police bust $339m gambling ring Police broke up two football betting rings in June, with a total value of $339 million. The leader and 23 other members were arrested in connection with the scheme, which operated across multiple provinces and cities in Northern Vietnam. They had been organizing online gambling since June 2015.

to give substantial credit as well as unrealistic commission programs, no one is doing well in terms of EBIDTA [earnings before interest, taxes, depreciation and amortization]. It’s for this reason most operators outside of Macau will only report gross gaming revenue to the media.”

INDOCHINA 27

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Asia Gaming Briefings | August 2016

FOCUS 28

Ten years on, Melco Crown faces uncertain future Almost a decade on from Melco Crown Entertainment’s 2006 IPO, there are signs that the joint venture between two of the world’s largest casino operators is not meeting its sky-high expectations.

A

s early as 2004, Melco International Development and Crown Resorts set out a vision for Melco PBL Entertainment, as the joint venture was known before a 2008 name change.

The ambitious project pledged to “develop and operate casino, gaming machines and casino hotel businesses and properties” across a number of Asian territories including Greater China, Singapore, Thailand, Vietnam, Japan, the Philippines, Indonesia and Malaysia.

However, ten years in and Melco Crown has only delivered on projects in two territories: Macau and the Philippines, the latter in partnership with Belle Corporation.

Perhaps more concerning for the JV are signs from both Crown and Melco that they may ultimately

Asia Gaming Briefings | August 2016

be better off going alone.

In May, Crown sold down $800 million in Melco Crown shares, reducing its holding from 34 percent to 27 percent. The move also saw James Packer step down as co-chairman of the joint venture.

At the time, Crown chairman Rob Rankin said the sale was part of “Crown’s ongoing capital management strategy”, while some speculated that Packer was fundraising in preparation of a buyout of some of Crown’s Australian assets.

Yet there was also a sense that Crown was keen to reduce its exposure to Macau despite public proclamations of retaining “great faith” in the territory.

Some even speculated the sell down might be the beginnings of a Crown exit from Melco Crown, although it is unlikely Crown would make a move that dramatic.

FOCUS 29

requirements. Without a change in law, a full Melco Crown buyout would not be a possibility.

What would, however, be possible is a Belle buyout of the property, which officially opened at the start of 2015 and has so far performed below expectations. Indeed, just six months after opening, Reuters reported that around 100 staff had been suspended as part of cost-cutting measures.

There have been more encouraging signs since. In May, Belle vice chairman Willy Ocier said City of Dreams Manila would post considerable growth now it was finally fully operational.

“

THE IMMEDIATE CHALLENGES FOR MELCO CROWN IN MACAU WILL BE TO TRY AND DEFEND THEIR MARKET SHARE, ESPECIALLY AT CITY OF DREAMS. “At this point I don’t think we’re seeing the beginnings of a complete exit of Crown from the Melco – Crown partnership,” Grant Govertsen from Union Gaming told AGB. “While Macau is experiencing a downturn, it does remain the crown jewel of the gaming world. As such, and considering that our long-term outlook for Macau is quite positive, it would behove Crown to continue to participate in this market,” he added.

Meanwhile from Melco’s side, the firm has focused on major projects in Vladivostok and Cyprus through vehicles separate to Melco Crown and is pursuing a license in Barcelona, Spain.

Ownership issues Govertsen said that there is a strong logic for a single owner and single decisionmaking process wherever possible, but Melco Crown’s projects so far have been characterized by additional, third-party involvement beyond the JV. In Manila, City of Dreams was itself a joint venture between Melco Crown and Belle Corporation as to fulfil local ownership

”

Govertsen, however, notes that an exit from City of Dreams Manila might not be off the table in the longer run. “Considering that the return on investment story at COD Manila isn’t as had been hoped, I don’t think equity holders of Melco Crown would be disappointed if the company were to explore strategic alternatives for their stake in this property,” he said.

There are similar ownership issues at Melco Crown’s newest Macau holding, Studio City, of which it owns a 60 percent stake.

Hedge fund partners Silver Point Capital and Oaktree Capital Management hold a combined 40 percent stake in the resort and, according to Bernstein Research, it would cost in the region of $1 billion to buy them out.

“The company needs to find a way to acquire the remaining 40 percent stake in Studio City,” Govertsen said of the arrangement.

“Until that happens we think Studio City will notably underperform in the market.”

Despite more than a year of speculation that Melco Crown would complete such a buyout, the firm has yet to find a way to

complete a full takeover of Studio City.

Melco Crown CEO Lawrence Ho said in February that any such deal would “need to be fair” to shareholders, adding that he was “always happy” to have a conversation with the minority shareholders about a takeover.

The future With these issues continuing to linger over Melco Crown, there is some understandable hesitancy about the firm’s longer term prospects.

While the Macau slowdown continues, the firm also faces challenges from a number of new resorts in the territory.

“The immediate challenges for Melco Crown in Macau will be to try and defend their market share, especially at City of Dreams. We think COD will face very intense pressure from Wynn Palace, and then from MGM Cotai,” said Govertsen.

This challenge was reflected in May’s disappointing Q1 2016 results, which saw profits slip 34 percent year-on-year and analysts caution that Studio City’s growth might be the result of cannibalization.

Meanwhile, in terms of potential new Melco Crown developments, Ho admitted in June that, “in Asia and around the world, we don’t see that many opportunities right now.”

Crown itself is looking at a corporate restructuring which would place its Asia holdings in a separate vehicle to its Australian assets - a move seen as a way of insulating those assets and potentially unlocking more value from its investments. Its share price was seen as undervalued due to the problems in Macau.

Crown stock opened more than 14 percent higher in Australia the morning after the transaction was announced.

However, Fitch Ratings injected a note of caution, saying the demerger will result in the removal of material investments that will reduce Crown’s cash flow. Fitch believes that this, combined with the higher dividend, will lead to a weakening in Crown’s credit metrics, particularly as the company has a significant capex pipeline for its Australian casino assets.

While there will be no immediate parting of the joint venture, it appears that both Melco and Crown will proceed with caution until Macau’s fortunes improve or new opportunities emerge in other Asian markets.

Asia Gaming Briefings | August 2016

SPECIAL 30

Asia Gaming Awards Hit Jackpot The inaugural Asia Gaming Awards, held during G2E Asia in Macau, was hailed by the industry as a roaring success, with senior gaming executives coming together at a gala dinner to celebrate the best in the industry.

H

osted by Asia Gaming Brief in association with G2E Asia and The Innovation Group, the awards were handed out in ten categories spanning the land-based and digital industries.

After a rigorous nomination and voting process by both the industry and an esteemed panel of judges, the results were audited by DSL Lawyers of Macau.

David Green, chair of the Organizing Committee and president of the Judging Panel, remarked: “This is an outstanding occasion to celebrate the enormous contribution to the Asian gaming industry by these innovative companies and individuals. Asia Pacific is without doubt the most dynamic region in the world when it comes to gaming, and the Asia Gaming Awards

Asia Gaming Briefings | August 2016

is a superb opportunity to recognize that.”

In the land-based sphere Galaxy Macau was honored with Best Integrated Resort, while Las Vegas Sands took home Best Gaming Operator, and Wynn Resorts the Best Casino Design.

Kevin Kelley, chief operating officer of Galaxy Entertainment Group said the company was “glad and proud to be granted such an esteemed recognition.”

Receiving the award, Richard Longhurst, director of operations, said it was “the variety of products on offer and not just about the casino” that set Galaxy Macau apart from the competition.

Sean McCreery, senior vice president of table games for Venetian Macau Limited also said it was a ”tremendous honor and privilege” to be named as Best

SPECIAL 31

The Asia Gaming Awards’ sponsors: Angel Playing Cards, Aristocrat, BBIN, Aruze, IGT, Melco Crown Entertainment, eBet, Macao Gaming Information Association, Scientific Games, YWS Design, EveryMatrix, Galaxy Entertainment Group, Pragmatic Play, Sands China, Sociedade de Jogos de Macau, SuzoHapp, and Wynn Resorts

Richard Longhurst, director of operations,

“

GEG (Best Integrated Resort)

The (success of Galaxy Macau) is the variety of products that are on offer and not just about the casino

”

Asia Gaming Briefings | August 2016

SPECIAL 32

Casino Operator. McCreery said while there is always a level of friendly rivalry between the operators, there’s “a sense of pride for the team to go back and to say that they have been successful in winning this award.”

Katharine Liu, vicepresidentofcommunications of Wynn Macau and Wynn Palace, said “we are extremely happy about this award. The award speaks for itself. I have to say this: Wynn is the best place to work.”

Meanwhile the land supplier awards were dominated by Scientific Games, which took to the stage a grand total of three times to receive honors for the Best Electronic Game Machine Manufacturer; Best Table Games Supplier; and Best Industry Supplier.

“We are so excited to have received three Awards! We are very privileged to have so many products that we can provide to the market across a wide range of different segments, a great team, and wonderful customers. What a fantastic honor,” said Ken Jolly, vice president Asia for Scientific Games.

The inaugural special award for Outstanding Contribution in the Field of Innovation was won by Suzo Happ. “This is for the team.

We’ve got a strong group of people, we listen to our customers and we try to find solutions for their problems,” said Geoffrey McDowell, managing director APA. In addition, eight young executives were selected and recognized for their leadership and potential to shape the future of the industry: Constance Hsu, Melco Crown Entertainment; Christopher Rowe, Aristocrat; Desmond Lam, University of Macau; Toby Simmons, Favourit; Albert Yu, Aruze Gaming; Nelson Cheung, Suzo Happ; Loren Stout, NagaCorp; Mike Bolsover, Silver Heritage.

In the online sphere, Bet365 received the Best Online Service Award, while Playtech was awarded Best Online Supplier and Best Mobile Solution.

Luis Pereira, managing director of Asia Gaming Brief, organizer of the awards, said “we were overwhelmed and honored by the immense support the industry has shown in the Asia Gaming Awards. We received over 1,000 nominations across the ten award categories and over 8,000 votes in such a short period!

It was an amazing first edition for us and we can only promise to follow through on this support with a bigger, better, more Asian edition next year!”

Rosalind Wade, managing director of Asia Gaming Brief said ““AGB is proud to be spearheading this important event for the Asia Pacific gaming industry, which deserves

Asia Gaming Briefings | August 2016

recognition for its innovative and pioneering efforts on a global stage.”

David Ritvo, executive vice president of The Innovation Group said “We, at the Innovation Group, are very proud and humbled to be a part of this event. We are looking forward to continuing the awards next year and capitalizing on the success to create one of the preeminent events at G2E Asia.”

Josephine Lee, executive vice president, Reed Exhibitions Greater China said “G2E Asia, on its 10th anniversary, is pleased to be in association with the inaugural Asia Gaming Awards that recognize significant achievements within the Asian gaming industry, and will no doubt become an annual highlight at the G2E Asia in Macau.”

The Asia Gaming Awards were sponsored

by Angel Playing Cards, Aristocrat, BBIN, Aruze, IGT, Melco Crown Entertainment, eBet, Macao Gaming Information Association, Scientific Games, YWS Design, EveryMatrix, Galaxy Entertainment Group, Pragmatic Play, Sands China, Sociedade de Jogos de Macau, SuzoHapp, and Wynn Resorts.

The Asia Gaming Awards aim to create an independent, fair and representative awards event that recognizes significant achievements within the Asian gaming industry. The AGAwards celebrate operators, regulators, suppliers, and service providers for their outstanding contributions to the industry in their respective fields, in both the online and land-based spheres.

The event generated more than 80 clippings from both the local and international press.

The Asia Gaming Awards’ Media Partners included Calvin Ayre, Casino International, Casino Life, Betting Business, iGaming Business, International Casino Review, GGR Asia, G3, Macau Daily Times and SBC News.

For more information please visit asiagamingawards.com

Katharine Liu, vice president of communications of Wynn Macau and Wynn Palace (Best Casino Design);

“

The award speaks for itself. Wynn is the best place to work.

”

SPECIAL 33

Sean McCreery, senior vice president of table games for Venetian Macau Limited (Best

“

Gaming Operator);

It is a tremendous honor and privilege to receive this award.

”

Geoff Freeman, president of the American Gaming Association, delivered

“

the opening remarks;

Congratulations on a successful inaugural event.

Well done.

”

Asia Gaming Briefings | August 2016

SPECIAL 34

Full house with more than 300 senior gaming executives honoring the achievements of the Asia Gaming Industry.

Geoff McDowell, managing director APAC, SuzoHapp;

“

This is a truly wonderful recognition of all our hard work and dedication in the Asia Pacific region.

�

Asia Gaming Briefings | August 2016

SPECIAL 35

David Rittvo, executive vice president of The Innovation Group congratulates the Young Talent Award recipients

“

Luis Pereira, managing director, Asia Gaming Brief

It was an amazing first edition for us and we can only promise to follow through on this amazing industry support with a bigger, better, more Asian, edition next year!

” Ken Jolly, vice president and managing director of gaming for Scientific Games (Best Electronic Game Machine Manufacturer; Best Table Games

“

Supplier; and Best Industry Supplier)

We are so excited to have received three Awards! What a fantastic honor!

”

Asia Gaming Briefings | August 2016

SPECIAL 36

Rosalind Wade, managing director of Asia Gaming Brief, thanking the members of the Organizing Committee, David Green, Peter Cohen, and David Rittvo.

Vincent Kelly, Aristocrat managing director Asia Pacific, with David Rittvo, EVP Innovation Group

Asia Gaming Briefings | August 2016

SPECIAL

VISIT ASIAGAMINGAWARDS.COM

THANK YOU! Produced by

in association with

Sponsors

Asia Gaming Briefings | August 2016

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38

AUSTRALASIA

38

AUSTRALIA

Online industry bemoans lost opportunity Australia’s recent review of online gambling was a missed opportunity to take the regulatory lead in the Asia Pacific region and may even contribute to growth in illegal offshore betting if its recommendations are implemented, industry experts say.

Asia Gaming Briefings | August 2016

W

ith Australia’s 2001 Interactive G am i ng Ac t b e c om i ng increasingly challenged by new technology and changes in customer preferences in gaming, the federal government last year commissioned a review that was meant to address the perceived shortfalls of the increasingly out-dated law.

The 2001 Act, implemented at a time when online gaming was in its relative infancy: failed to address the use of new technologies. The review was expected to bring the regulations up to date and at the same time explore measures to combat the increasing leakage of taxable revenue to offshore operators.

Instead, critics say, the timing of the review – which falls in an election year - contributed to it being hijacked by conservative political power-brokers aligned with anti-gambling groups. As such, the end result became an exploration of possible harm minimization measures for problem gamblers that seem out of step with the worldwide trend.

Backward step “Australia had a chance to become an online betting market leader, both in the region and globally but this is a setback,” said Edward Beesley, strategy consultant & founder of TSoK Consultancy. “There’s a real mixed message from this review. Australia is a country steeped in wagering history, but the anomaly is that the legislation here isn’t developing the sector in line with new technologies, or for the benefit of regulated online operators and their customers.”

Australia boasts healthy betting numbers.

According to the Queensland Treasury, which compiles figures for the country’s gambling industry, total revenue in the fiscal 2013/2014 year was AS$21.5 billion (US$16 billion), an increase of 1.8 percent. Sports betting made up a small part with A$625.9 million, but was the fastest growing at 29 percent. The bulk is spent on pokies and lottery.

According to a Morgan Stanley Research paper, six percent of the 2014 turnover was made up of online wagering, which was also growing at a strong clip of 15 percent per annum, far outstripping growth in casino gambling and horse racing at 6.5 percent growth and a 2.4 percent decline respectively.

Beesley warned that Australia’s privileged place as a destination for overseas investment could eventually come under threat as “sleeping giants” in the region awake from

AUSTRALASIA 39

their current regulatory strangleholds and became more liberal with their online laws.

“Australia is ahead of a lot of countries at the moment, including the likes of the United States, India and China – where online betting is essentially outlawed - but if Australia doesn’t start to upgrade its online legislation, and one of those three countries flipped its switch – things could change very quickly and Australia may not seem so attractive anymore to overseas investment.

“

THE LEGISLATION HERE ISN’T DEVELOPING THE SECTOR IN LINE WITH NEW TECHNOLOGIES, OR FOR THE BENEFIT OF REGULATED ONLINE OPERATORS AND THEIR CUSTOMERS.

”

I am astonished, but not surprised by the recent recommendations, here we have a good, but not great, foundation that is bringing money into Australia, creating jobs and opening up to further opportunities from suppliers into the region.”

Problem gambling focus Fourteen of the 19 recommendations from the review were accepted by the government, with another four agreed to in principle - but the vast majority of the suggestions regarded initiatives to mitigate losses by problem gamblers, including selfexclusion programs and a blanket ban on credit betting.

In a note on the review, Australian law firm Addisons said, as a result of the review “Australia’s regulatory regime relating to online gambling will remain inconsistent with the regulatory regimes in countries like the United Kingdom, Italy, Spain, Ireland and Denmark.”

Setting aside the fact that the suggestions are still required to be passed as law, critics add that the review failed to address the most pertinent issues at hand: that of the new bet types and the loss of revenue to the growing number of offshore bookmakers, many of whom are taking on the look and feel of legitimized operators. This will also exacerbate the harmful consequences that may result – the overseas providers will be beyond the reach of Australian regulators and will not be subject to the restraints imposed by Australian law, thereby making their product offerings far more attractive than the services local licensed operators can provide.

Firmly in the cross-hairs of the review was “in-play” sports betting, banned in 2001 before internet betting had become prevalent, and specifically the contentious “Click to Call” technology being utilized

More value sought from Crown jewels Crown Resorts is considering setting up a new listed company to separate its international and domestic assets to boost shareholder value. As well as potentially pursuing a demerger of certain international investments in a separately listed holding company, the operator said it also intends to “adopt a new dividend policy to pay 100 percent of normalized net profit after tax, effective immediately”, and to “explore a potential IPO of 49 percent interest in a property trust, which would own Crown Resorts’ Australian hotels (excluding Crown Towers Melbourne)...”

Asia Gaming Briefings | August 2016

AUSTRALASIA 40

T OTAL GAMBLING EXPENDITURE All gambling Y13/14 A$21.15b Sports betting $625.95m

+1.8% +29% -2.4%

Racing $2.78b Total gaming (incl. pokies and lottery) $17.74b Casinos $4.38b

+1.7%

+6.5% (Source: Queensland Treasury)

Queensland EGM revenue June

+2.4%

H2 $625.95m

+2.9%

E Y16E

+3.8% (Source: CLSA)

Ainsworth investors greenlight Novomatic deal Ainsworth Game Technology shareholders have approved the sale of Len Ainsworth’s stake in the company to Novomatic. “Novomatic is a highly respected and impressive industry leader. We look forward to progressing this relationship with a view to delivering the significant expected benefits that have been outlined and execute on our international growth strategy,” AGT CEO Danny Gladstone said.

Asia Gaming Briefings | August 2016

by some bookmakers, including William Hill and Paddy Power.

“Click to Call” was developed as a technical means where customers could simply call a number that enabled them to place an in-play bet on a sporting event in progress thereby falling within the letter of the law but not, according to the government, within the interest or spirit of the law.

Even though the review was at least in part aimed at targeting customers betting with overseas operators online – an illegal act in Australia – if the status quo is maintained and customers choices remain limited, experts say it could actually result in even more money flowing into the hands of foreign bookmakers based in jurisdictions where myriad bet types and new technologies can more easily be put into play.

Driving punters offshore “I’m bewildered by it, gambling is a huge revenue earner for the government, but this review seems to be aimed at penalizing tax-paying, legal operators and in some ways may end up benefiting the offshore operators – where no tax is paid,” Beesley said.

Ad d i s on s a g re e d t h at w h i l e t h e recommendations if implemented are likely to bring greater efficacy domestically, “it remains a matter of some uncertainty as to whether these measures will be effective outside of Australia.”

Submissions to the review on the scope of illegal wagering varied widely, one estimate put the figure at A$400 million, or more than one quarter of the legal market and while officials acknowledged this figure in the report, the government response was far more conservative in its estimates.

The review stated that illegal betting could best be tackled using a “multifaceted” approach, with clearer definitions on what constitutes an illegal offshore operator, and measures like payment blocking and attempting to block the websites of unwanted operators.

Critics say it’s the limitations such as the ban on betting products that could result in customers being driven into the clutches of foreign bookmakers.

Beesley described the situation simply by saying, “if you fail to strengthen your onshore online product portfolio, the offshore propositions will continue to grow as customers look elsewhere so that they can

continue using their smart phones, tablets or laptops for all their betting requirements.”

This was similar to the view of sports betting integrity watchdog ESSA, whose submission also outlined how there was no proven evidence to support that in-play betting was a significant contributor to problem gambling.

Political drivers In response to the review, ESSA said the position on in-play was “inconsistent” and also pointed to a 2011 Victorian state government review into betting legislation, that determined that the ban on in-play betting laid out in 2001 served “no useful purpose” and that the bet type actually may assist sports from an integrity standpoint.

Beesley went on to say that there was little doubt that the current political landscape in Australia is a major contributing factor in the seemingly conservative findings of the review.

“It’s an absolute winner politically with the upcoming election,” he said. “ While at this stage these are just recommendations – nothing has happened yet as they still have be voted into legislation and that wouldn’t seem likely with the election so soon. Hopefully after the outcome of the election some products and services can be trialled online to support the tax-paying legal operators whilst the government assesses problem gambling management and looks to develop the appropriate technology to limit the usage of offshore betting platforms.”

But this is unlikely in Jamie Nettleton’s view. There is considerable widespread public concern about the extent of advertising of legal wagering products. Politicians fear that any extension of legal gambling would result in a public backlash, and it would appear that any efforts at attempting to liberalize Australia’s online gambling regime, at least in the short term, are unlikely to be successful.

This is despite the understanding, at least from the perspective of Australia’s leading sports bodies, that one of the key allies in promoting integrity in sport (and this is particularly relevant in light of this week’s match fixing claims involving the NRL), is the betting information provided by legal online sports betting operators.

Having said this, the real test will be after the 2 July election and the manner in which the new government decides to amend the Interactive Gambling Act.

Asia Gaming Briefings | August 2016

AUSTRALASIA 42

CNMI

A small casino with big ambitions When Hong Kong listed Imperial Pacific said it would double its planned investment on Saipan, a tiny Pacific territory that forms part of the Commonwealth of Northern Mariana Islands, it’s fair to say eyebrows in the industry were raised.

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any doubted the island, with its limited infrastructure, would be able to attract enough visitors to generate a return on an investment of that magnitude. Now, almost a year after its temporary casino began operations, the market is beginning to see the vision materialize.

The property held a soft opening in July last year with just 10 tables and immediately took $400,000 to $500,000, averaging around 5,800 customers a day. In April, it achieved an eye-­popping $3.2 billion of rolling volume and it has delivered an average of about $2 billion a month in table games roll since November 2015 when it began VIP operations and held its official opening of the temporary casino.

The temporary casino now has 32 mass tables, six premium tables, seven VIP tables and 106 slots, and more recent figures show a slowdown to $1.6 billion in June roll.

AGB sat down with Mark A. Brown, CEO of Imperial Pacific, to find out what is making the destination so popular.

Idyllic location Brown was approached while he was CEO at NagaCorp and said that once he heard the story and saw the location, which took six years to find, he knew it was an opportunity he couldn’t pass up.

The wholly-owned subsidiary of Imperial Pacific International Holdings, Best Sunshine, has won the sole right to run Saipan’s casinos in 2014 after a bitterly contested fight with rival Mega Stars Overseas’ Marianas Stars Entertainment. Imperial Pacific estimated in its tender submission that the total investment would be approximately $3 billion.

The group bought two planes in 2014 and decided to open a temporary casino to begin generating revenue while work continues on the planned Grand Mariana property, due for

Asia Gaming Briefings | August 2016

completion in New Year 2016/2017.

“It is incredible. We are continually growing every month,” said Brown, adding that the mass business also continues to do well.

Brown was quick to stress that, contrary to recent reports, the casino is not “saturated,” merely that the explosive rate of growth is unlikely to continue given current capacity constraints. Real growth should only come once the new resort is open, with a planned 250 tables. Contrary to Macau, the upside is that there is no table cap in Saipan.

Repeat visitors In terms of fees and taxes, the casino operator has to pay a fixed license fee of $15 million per year for the next 40 years. Upon completion of Phase II, there will be an additional $20 million fee per year. There is no casino tax in Saipan, but the company pays sales tax of 5 percent, rebatable from income tax. Since the opening of its temporary casino on Nov. 28, last year, Best Sunshine has so far remitted approximately $24 million in taxes, according to Brown.

The casino’s customers are a mixture of local business owners, Chinese, Japanese and Korean tourists. Brown estimates that its current VIP customers number to be around 500, with about 60 of those returning regularly. All VIP play is direct, so far, as junket operators have yet to be approved by the Saipan Commonwealth Casino Commission. Each one of them is personally known to Imperial Pacific and has to be licensed by the Commission.

The company operates a rolling chip commission program. Recently, a request to the Commonwealth Casino Commission to increase the rebate scheme to a competitive rate in order to better compete with the changing incentives currently offered by Macau and the Philippines, and was granted a six­-month trial period.

Luxury trimmings Brown observed that players in the $20­-30,000 range do not qualify for rolling chip programs in Macau, so they are being introduced to rebates, creating good stickiness.

In addition to the two private planes, Imperial Pacific has five yachts and one villa, and VIPs are ferried everywhere to take part in unforgettable excursion experiences such as sunset dinners, cruises on the yacht, and fishing in the crystal clean waters. Brown says that this is what makes Saipan special

AUSTRALASIA 43

TOURISM ARRIVALS April visitor arrivals 35,394 Jan to April April China visitors 15,108

-12.5%

-2.3% +7.1%

GROSS GAMING REVENUE BEST SUNSHINE JUNE VIP ROLL $1.65b MAY VIP ROLL $2.53b APRIL VIP ROLL $3.19b

Tinian Dynasty owner gets casino license The Tinian Casino Gaming Control Commission has granted a conditional casino license to Tinian Entertainment, which plans to “acquire, renovate, rehabilitate and brand the Tinian Dynasty Hotel & Casino, which has been shuttered for months. Tinian Entertainment is a unit of CNMI Resorts Development.

in the Asian market, with no other location able to offer VIPs these unique experiences that nature offers locally. He says that the service provided is second-­to­-none, with the company currently employing 1,200 staff, 60 percent of whom are locals.

In terms of infrastructure, the island currently has 2,800 hotel rooms, which are consistently close to 100 percent occupancy.

Compared to Macau, which has five hotel rooms per table, Saipan has around 12 rooms per table when the Grand Mariana

is opened. Best Sunshine is also setting up restaurants and coffee shops, partnering with some that have celebrity chefs to escalate their appeal to visitors.

Phase I of the development, the Grand Mariana Casino Hotel and Resort is expected to be completed in December 2016, with the planned 14­storey hotel building to be opened in April 2017. The hotel targets to offer over 350 opulent hotel rooms and 15 deluxe villas “to exceed the satisfaction of all guests who pay attention to every detail.”

Alter City breaks ground on Tinian Macau’s Alter City Group held the groundbreaking ceremony for a $1.2 billion project on Tinian, which is scheduled to begin construction by the end of this year. The Plumeria Golf and Casino Resort may take up to 12 years to complete and will include not less than 5,500 rooms, a golf course and other infrastructure.

Asia Gaming Briefings | August 2016

44

SOUTH ASIA

44

INDIA

Maharashtra rolls the dice on casinos Lawmakers in the Indian state of Maharashtra are considering moves to legalize gambling, potentially waking a sleeping tiger in Asia’s gaming industry.

Asia Gaming Briefings | August 2016

SOUTH ASIA

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any see India as having the same kind of demographic potential as its giant neighbor China, whose outbound travel preferences and spending are shaping the global tourism industry. It has a population of more than one billion people, a rapidly expanding middle class with a growing appetite for travel and also a strong propensity to gamble.

Therefore developments in Maharashtra, the second-most populous state, are being followed closely.

At present, casino gambling is only permitted in three states -- Goa, Sikkim and Daman -- and there is little in the way of upscale facilities, or modern machines. The properties on the whole do not provide the scale and range of amenities you would expect from some of Asia’s other integrated resorts.

The current move to consider legalizing casinos in Maharashtra, which would likely prove the game changer for the market, follows the discovery of mothballed legislation dating back to 1976 by then law student Jay Sayta, which was never enacted. The Maharashtra Casinos (Control & Tax) Act could lead to casinos in the state if it is notified.

The government of the state, whose capital is Mumbai, is expected to make a decision by the end of this year.

Global Market Advisors in a recent update to its April White Paper on India estimated that the potential market in the state alone could be worth about $1.1 billion by 2021. The bulk of that -- $874.9 million -- would come from locals gambling, with the remainder from tourism, both domestic and international.

If the State of Maharashtra were to employ a 25 percent gaming tax rate, the state could expect to receive approximately $273.2 million

GROSS GAMING REVENUE TOTAL GAMBLING SPEND ESTIMATE $60b (INCLUDING WAGERING, LEGAL AND ILLEGAL) $10.1b

GGR Y21E

(Source: Global Market Advisors based on estimates for a legal casino industry)

Maharashtra GGR Y21E

$1.1b

Tax revenue Y21E

$273.2m

(Source: Global Market Advisors)

in gaming revenue in the subject year, the report said.

The report, compiled by director of research Kit Szybala, finds that “Maharashtra and Mumbai in particular, present an appealing gaming market opportunity.”

Maharashtra is home to about 112.4 million people, or 9.3 percent in total. About 18.4 million people live within the urban agglomeration of Mumbai and additionally, about 50.8 million people live within a five

“

MAHARASHTRA AND MUMBAI IN PARTICULAR PRESENT AN APPEALING GAMING MARKET OPPORTUNITY

”

hour drive.

The state makes up about 23.2 percent of India’s Gross Domestic Product and its per capita income in 2011 was $1,500, above the national average of $1,100.

Adding to the momentum have been calls from industry and tourism bodies, seeking to boost revenue.

A newly created gaming body, the All India Gaming Federation, is pushing the government to allow foreign direct investment

in the gambling, betting and lottery sector. The AIGF has argued that while these industries are recognized as legitimate industries globally, they remain illegal in most parts of India.

Under the current FDI policy, any form of foreign technological collaboration is prohibited in the gambling and betting sector. AIGF has sent a letter to the ministry, asking it to allow at least 26 percent foreign equity participation, saying such a move would bring in foreign investment of more than $1.5 billion to India and provide thousands of jobs.

Still, opposition to opening the market remains strong.

Delta Group, which has received the necessary five-star accreditation to operate a casino in the state of Daman, is still waiting on final approval to open the resort, while the High Court of Bombay has received a petition against a casino license for the group’s fivestar hotel in Goa. Add to that, forecasts for the market’s potential assume that locals will be allowed, which is not a given. The state of Sikkim recently banned state residents from entering casinos and hiked the entrance fee from Rs. 500 ($7.4) to Rs. 1000.

The potential of India’s outbound market is also being closely eyed by international casino operators. Silver Heritage last year opened The Millionaire’s Club in Katmandu’s Shangri-la Hotel in neighbouring Nepal, where casinos are legal. It is also developing a five-star resort in the south of the country. The investment rationale is to benefit from the huge untapped potential from Indians, who are able to cross the border freely.

Meanwhile Crown Resorts had been considering an integrated resort in Sri Lanka, before the island’s government banned casinos.

Court hands sports betting baton to governments India’s Supreme Court has passed on the responsibility of determining whether to legalize sports betting in India, saying it is for politicians to decide. “The judiciary has taken the first step to end the limbo pertaining to who will initiate the first step towards legalization. The legislature can also now consider taking a measured call after consulting the stakeholders,” said Vidushpat Sidhania, partner specializing in Sports Law at Krida Legal.

Sri Lanka PM dashes casino hopes Sri Lankan Prime Minister Ranil Wickremesinghe has ruled out allowing casinos in the country, saying such investors will have no place in the country. The PM made the statement in response to a question raised at the Singapore Entrepreneurs Organization, which asked whether the present government would encourage the setting up of the casino industry in Sri Lanka.

Asia Gaming Briefings | August 2016

SUPPLIER SPECIAL REPORT 46

AGE 2016

Australia to increase its focus on new technologies The Australasian Gaming Expo celebrates its 27th consecutive year in 2016.

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ustralia is currently host to 13 casinos, which operate around 1,500 gaming tables and 13,000 gaming machines,” said Ross Ferrar, CEO of the Gaming Technologies Association and organizer of the show.

“With major new integrated resorts to be built in Sydney and in Brisbane, and another planned for Cairns over the next few years, the country will undoubtedly see an increase in focus on electronic table games and new technologies.”

This year, the show will see 25 percent more exhibitors donning its halls, with a focus on new products and technology from both domestic and international suppliers.

“2015 was a sell out year so we’ve increased capacity for 2016 to keep up with exhibitor demand. Our long term exhibitors wanted to showcase more products which required more floor space, but it has also allowed for more new exhibitors,” said Ferrar.

“Over 20 percent of exhibitors at the 2016 Australasian Gaming Expo are new exhibitors, with new products and services to offer the industry,” he said.

Asia Gaming Briefings | August 2016

The exhibition, held at Glebe Island on August 9-11, 2016 will also be accompanied by a standalone conference held at the Novotel Sydney.

Organized by Asia-Pacific based Beacon Events, the 7th annual Gaming, Racing & Wagering Australia (GRWA) conference will be held on August 8-10, 2016.

The event aims to bring together Australia’s leading sports betting, gaming, wagering, lottery and racing executives to learn about the latest developments in industry, incoming regulations and to discuss new ideas / strategies.

This year, the focus of the conference will be on the potential of esports, social media marketing in gaming, land-based opportunities in emerging markets, fantasy sports and innovation in wagering.

The event has confirmed speakers including Damon Robbins, CEO at Racenet, Tom Waterhouse, CEO at William Hill, Luis Pereira, MD at Asia Gaming Brief, Shaun McCamley, Head – Asia Regional Office at GMA, and Martin Saunders, Business Development at Rewardbet.

puzzled by

CASH MANAGEMENT? CPI has put all of the pieces together. Now, the industry’s leading brands—CashCode, Conlux, MEI, Money Controls, NRI and Telequip—have been combined into one comprehensive portfolio.

CPI is more than products. It is a one-stop shop for coin, note and cashless solutions that lower transaction costs from the point of sale to the deposit. The products and expertise that represent these brands will accelerate expectations for automated payment systems.

Technology that counts.

CranePI.com

SUPPLIER SPECIAL REPORT 48 AINSWORTH

Latest innovations

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o show its solid commitment to delivering products designed for the Australasia market, Ainsworth will showcase a range of premium titles at the upcoming Australasian Gaming Expo. These are highlighted by spectacular graphics and are packed with features that players will enjoy such as free games, stacked wilds and jackpots.

Ainsworth is particularly excited about AGE where it will showcase the new Oriental Express link. This high-end Asian themed link offers 3 levels of link progressives and

two levels of standalone progressives. With superior oriental titles to choose from: Lucky Ye Ha Hai and Action 8’s, Oriental Express is certain to become a player favorite on any casino floor. Lucky Ye Ha Hai is a graphical rich five-reel 50 line offering created especially for the Asian appeal. Lucky Ye Ha Hai includes a unique multi dice feature as well as eight exhilarating free games with guaranteed reveal symbols and accumulating wild multipliers.

“The Asian market has an appetite for the best in class games and at Ainsworth we

ARISTOCRAT

Bright future & colorful vision

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ristocrat is looking forward to sharing their colorful vision for the future alongside industry partners.

“Our industry is transforming at a faster rate than ever, but the future has never looked brighter.

Advancing technology and new gaming experiences open up a host of opportunities for operators, players and manufacturers alike.

We believe that a culture of thought-leadership is crucial to developing innovative solutions that enable us all to make the most of these opportunities,” said the company.

With a renewed focus on systems business, unique signage options, tailored service offerings, and brand new content and hardware on show, Aristocrat plans to continue to deliver an innovative portfolio into 2017 and beyond.

Some key titles not to miss include Dragon Link which further builds on popular market trends, Good Fortune with wide-area progressive functionality and 5 Dragons Empire; a five-theme multi game with two brand new additions.

Other notable multi games on show include Player’s Choice Emerald Edition and Retro Fever - just a few amongst an impressive line-up that delegates will see on the Aristocrat stand.

At AGE 2016, Aristocrat will dedicate a large area to exhibiting some incredibly unique ideas beyond what currently exists in Australia’s Class III gaming environment. From diverse cabinet form factors housing local and international content, BI & analytics tools, to concepts well beyond our era, this area is designed to “wow” visitors.

Aristocrat’s industry partners will also feature in a number of areas on the Aristocrat stand.

“In partnership with our industry suppliers, we’re proud to exhibit some examples of product activation and complimentary gaming solutions across the Aristocrat stand,” the company added.

“We’re fortunate to be a part of such a vibrant and energetic industry where the opportunities are abundant. We look forward to seeing you at the show to share some of our ideas with you. Leading new thought, inspiring innovation, partnering with you. AGE 2016 – creating a brighter future.”

Aristocrat will be exhibiting at stand 500.

Asia Gaming Briefings | August 2016

are dedicated to satisfying these demands with highly innovative technology, cabinet flexibility, product performance and a wide range of game options.”

Ainsworth is exhibiting at stand 300.

BMM TESTLABS

Technical and regulatory expertise

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aming testing lab and technical consultancy BMM Testlabs is celebrating another significant year in the run up - the Australasian Gaming Expo.

Kirk White, executive vice president & general manager, commented, “BMM continues to increase its quality testing advantage in the Australian gaming market through the retention of its long-standing technical and regulatory expertise and the extension of its world-class training programs for its test engineers.”

“BMMs worldwide commitment to the ISTQB program (International Software Testing Qualifications Board) has already enabled many of our test engineers in Australia, and around the world, to train and improve their skill sets. This is providing BMM with exceptional productivity improvements, despite the complexity of gaming products coming into the Australian market.

BMM’s continuous drive for improvement is recognized and appreciated by our customers globally, as we share their objective of delivering high quality and compliant products into the Australian and international gaming markets.”

White concluded, “BMM’s progressive development of testing methodologies, technical expertise and customer service over the last 34 years continues to exceed the increasing requirements of customers and regulators.

BMM maintains the highest level of independent quality testing in Australia and around the world, and we look forward to sharing our expertise and industry knowledge with both new and existing customers at this year’s Australasian Gaming Expo.”

BMM Testlabs is exhibiting at stand 605.

SUPPLIER SPECIAL REPORT 49 CRANE PAYMENT INNOVATIONS

Automated payment systems

C

rane Payment Innovations (CPI), a Crane Co. Company, will be exhibiting its comprehensive portfolio of automated payment systems.

Among the products on display will be the combination of the SC Advance note acceptor and EASITRAX Web, as well as the Cyclone Hopper and the Condor Premier coin acceptor.

SC Advance is part of the reliable SC product line that has achieved a global installed base of more than 2 million units.

Its value proposition revolves around the key performance attributes responsible for operator profitability and customer satisfaction – acceptance, jam rate, security and cost of ownership. Even as currencies evolve, operators can remain confident in SC Advance for reliable note acceptance. It has the expansive memory to accommodate new banknote introductions, including

those that will soon be released in Australia and New Zealand. CPI is providing updated software before the new notes actually enter circulation.

When used together, SC Advance and EASITRAX Web represent one of CPI’s most comprehensive cash management solutions.

EASITRAX Web is a recent software extension of the EASITRAX Soft Count system, which has now been installed in more than 150,000 games worldwide. It links the slot floor to the back room, collecting performance data from SC acceptor heads that can be used to streamline the drop process, facilitate asset evaluations and conduct preventative maintenance programs.

The Cyclone Hopper and Condor Premier coin acceptor will also be among the coin products shown on the CPI booth this year. With its small footprint, the Cyclone Hopper is ideal for applications where lower

coin capacities are required, including the latest multi-pay gaming machines. And the high-speed Condor Premier coin acceptor is configurable to accept up to 12 different coins, enabling compliance with local jurisdictional requirements.

CPI will be exhibiting at stand 360.

in the New South Wales market. The new product delivers fast-hitting features with a unique 11-step jackpot and bonus prize ladder.

IGT will also “set the gold standard” for multi-game suites with new packages for the Multistar Champion Series. Attendees can experience the company’s Champion Series Platinum and Champion Series Titanium products, which offer six multi-denominational games, while the Champion Series Black has four IGT Hall of Fame game themes. These games and many others will be showcased on IGT’s CrystalDual-i cabinet, which is designed to deliver a unique player experience and caters to the Australasian player base.

IGT will also spotlight its comprehensive gaming management system, IGT Advantage Club, which features intelligent software that recognizes player preferences in real time to enable on the spot service delivery.

The systems solution also

offers award-winning loyalty and bonusing applications that have been proven to drive gaming performance in New South Wales.

In addition, attendees can experience the IGT theatre, which offers complimentary business presentations from industry experts.

Presenters plan to speak on a range of topics relevant to the hospitality industry.

IGT can be found at stand 530 at the show.

IGT

That’s Gold

I

GT is set to deliver a compelling portfolio of gaming solutions at AGE 2016.

Building off the popular expression, “That’s Gold!”, the company will offer various golden products such as the new Megabucks Gold state-wide link, which features Australia’s largest statewide link jackpot that starts at A$250,000 (US$189,500). Other key launches include IGT’s fast-hitting Ca$h Climb link, and new additions to the Multistar Champion Series games.

Megabucks Gold builds on the success of IGT’s original Megabucks state-wide link in Australia. The game has awarded over A$10 million in jackpots including the largest state-wide link jackpot of A$658,000.

In line with Australian player preferences, IGT’s Megabucks Gold now offers a suite of four game themes that are multi denominational, enabling players to customize their gameplay to their preferred playing style.

IGT will spotlight its newly released Ca$h Climb link, which has gained significant momentum since it launched

Asia Gaming Briefings | August 2016

SUPPLIER SPECIAL REPORT 50 INDEPENDENT GAMING

Newest product line Bluestar

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ndependent Gaming is an international leader in gaming technology for the casino, club and hotel industries. The company manufactures and distributes poker machines and jackpot systems. The company was established in 1986 and has grown over the last 30 years to become one of the largest privately owned gaming machine manufacturers in Australia. It is

wholly owned and controlled by Lawrence Shepherd, the managing director.

The company will be showcasing their newest product line BLUESTAR in addition to their highly successful Flex-Link Jackpot system which is manufactured and distributed for the Australian and international market.

Bluestar has undergone two years of intensive project design and innovation to ensure it

is suitable specifically for the Australasian gaming clientele. Bluestar provides the latest visual and sound experience combined in a leading edge cabinet design.

The presence of the new bench/upright Bluestar poker machine will demand attention on any gaming floor.

In addition to Bluestar, Independent Gaming also features their exclusive FlexiLink jackpot system which was developed by their own R&D division. More than 2000 Flexi-Links have been installed in gaming venues over the last 14 years since it was originally introduced into the market.

Independent Gaming also provides the NEMESIS, a leading edge slant/multi terminal slot product, complete with flip screen and foot play technology.

Independent Gaming offers technical servicing of poker machines on an ongoing basis and technicians that have the expertise, experience and flexibility to customize machines and systems and deliver maintenance that suits the special requirements of individual customers.

Independent Gaming will be located at stand 450.

JCM

Award-winning technology

J

CM will exhibit its award-winning portfolio of products, including the iVIZION and UBA bill validators, the ICB 3.0 Intelligent Cash Box, the GEN2 Universal printer, and the BlueWave Deluxe firmware upload tool.

Ian Payne, general manager of JCM Global Asia-Pacific said, “Each product in the JCM portfolio is the result of our decades-long commitment to our customers. Our global spirit of innovation drives us to continually improve our products, processes, and level of service – all so our customers can make deep and meaningful connections with their patrons.”

Leading JCM’s exhibition at AGE is iVIZION, which combines a 99 percent acceptance rate with the industry-leading Contact Image Sensor (CIS) technology that sees the entire front and back of a note or ticket, for the highest levels of security.

Standing alongside iVIZION is the UBA,

Asia Gaming Briefings | August 2016

with superior magnetic and optical sensing technology combined with superior antipullback technology. It accepts the world’s currencies, with a bezel that was designed to easily accepts notes up to 85mm wide, and its automatic retry feature and patented removable stacker mechanism keeps the game going.

Working in concert with the bill validators is JCM’s ICB 3.0 system, which increases accuracy and eliminates human error, and its web reporting empowers users to view reports from the casino floor in real time.

The award-winning GEN2 Universal thermal printer features universal communication ports, a larger paper capacity, Intelligent Ticket Handling technology, jam-reducing Intelligent Bezel system and available 2 -color printing technology.

JCM will also exhibit the hand-held firmware upload tool BlueWave Deluxe,

which allows users to easily load and upgrade validator firmware from the gaming device.

JCM can be found at stand 466 at the tradeshow.

SUPPLIER SPECIAL REPORT 51 NORTHALLEY

Next gen digital products

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orthAlley (India) Pvt Ltd is one of the sponsors of this year’s Gaming, Racing & Wagering Australia 2016.

With a focus on next generation digital products, services and solutions, such as immersive technology, custom application development, cloud services and big data solutions, the company helps clients to reinvent themselves as digital enterprises poised to take on the challenges of the digital age.

NorthAlley has established itself as a trusted vendor and partner to clients across geographies by creating robust and highvalue solutions, especially for the horse racing and pari-mutuel betting industries.

The comprehensive portfolio of offerings,

including solutions such as development of single-login wagering platforms and information management system, custom software for tote management and racing m an a ge m e nt , a dv an c e d te ch n ol o g y implementation such as AR/VR and delivery of omni-channel experience etc., combine to be a complete end-to-end solution resulting in value-added services for clients.

At the core of every delivery of NorthAlley is cutting-edge software and management services built on extensive knowledge of the global racing and betting industries.

NorthAlley has also pioneered

PALTRONICS

LEDs to light up show

development of products exclusively for land-based betting and gaming enterprises.

Products include the sport and race betting POS terminal, a mobile wagering platform and its racing ERP solution.

ROYAL WINS

Making waves in the online casino industry

P

altronics is well known throughout the industry for the One Link Jackpot Management System, but at this year’s AGE, Paltronics will be highlighting their superior range of LED displays.

Featured will be the impressive three-sided circular LED display, a spectacular showcase on any floor. Also highlighted is a bank overhead ‘concave’ LED display, which is a perfect way to optimize game performance, LEDs - a proven and popular way to display meters.

The LEDs are available in a number of configurations from standard single sided, four-way cubed, circular. All options allow for the display of high resolution graphics, and standard or customized graphics themes are available.

The Paltronics Table Range of products has been strengthened with the recent introduction of Clarity Roulette, an ultra thin laminated underfelt lighting system to liven up and illuminate the Roulette playing surface. The under lighting substrate is only 18mm deep and can therefore be retrofitted within the Roulette table top without the need for any expensive table modifications.

Clarity Roulette enhances the game and draws players to the table.

A strong “No More Bets” signal helps game security and winning number results light up to aid the dealer and player alike.

The updated Spectra Winning Number Displays for Roulette and Baccarat will also be on display.

Paltronics will be exhibiting at stand 474.

R

oyal Wins have been making waves in the online casino industry with their innovative product, the Kash Karnival, a ground-breaking online social casino hub featuring real-item prizes on skill-game wagering. As casinos worldwide align their strategies to attract more millennials due to falling revenues from traditional gaming, skill gambling (alongside fantasy eSports), is turning out to be a massive phenomenon to attract younger players looking to cashin on their skills in playing casual games.

Since releasing the skill gaming casino, Kash Karnival, Royal Wins has managed to successfully attract large amounts of millennials to its app looking to cash-in or redeem real items from their winnings on skill casual games. Recently, Royal Wins exhibited and presented at the iGA in Macau introducing the Kash Karnival to

Asia and global industry representatives within Asia. They now set their sights on making a bigger impact in their home country, Australia, as they unveil the Kash Karnival at an interactive exhibition booth at the AGE in Sydney, with a unique “spectacular spectacle” 4D presentation at the GRWA – both events occurring at the same time August 9-11, 2016.

Digital marketer, Michael Moretti has been at the front of organizing Royal Wins’ participation at the two events. “We are very excited with the upcoming events for the opportunity to showcase our major advances within the industry as well as our results in penetrating into the millennial crowd,” says Moretti, “We expect to reach a large collective of industry professionals especially the locals, and draw attention to our product. We are looking forward to meeting a lot of new networks and to reconnect with familiar faces who will be hungry for more information on our innovative contributions to the future of the casino industry.”

Royal Wins will be showcasing their skill games at the AGE at stand 733.

Asia Gaming Briefings | August 2016

SUPPLIER SPECIAL REPORT 52 SUZOHAPP

Innovator, manufacturer & distributor

TRANSACT

Award-winning ticket printers

T

he strength and depth of SUZOHAPP as an innovator, manufacturer and distributor of best-in-class solutions will be on clear display at the Australasian Gaming Expo.

As the global gaming industry’s largest supplier of spare parts, components and cash handling equipment, SUZOHAPP will be presenting its widest product range to the Australian Gaming industry. The SUZOHAPP team has great experience in providing every customer with the products and services that best fit their needs - visitors are invited to join the team at AGE and discover the solutions able to add real value to their business.

SUZOHAPP will be showing InteractivePRO Table and AddOn TV that have already celebrated success after success in the USA – they can be found at major casinos, particularly in Las Vegas. The AGE will enable Australian operators to witness first hand the sheer entertainment they can offer their players in a wide variety of ways.

A selection of components will be on display at the SUZOHAPP stand including the outstanding MFL bill validator and the EPIC 950, the TransAct printer known for its unmatched reliability.

Particular focus will be placed on the SUZOHAPP ‘PRO’ range that offers solutions in a very wide field of requirements, such as the Vision PRO for monitors and touchscreens and the Display PRO signage, a smart standalone display that can play pictures and videos. This contemporary display has been specifically designed for flexible end of bank signage applications.

The AGE will also be an excellent opportunity for operators to learn more about the features and benefits of the SUZOHAPP Loyalty Kiosk, integrated with a number of Loyalty system providers and POS companies, and the Cash Redemption terminal, the ideal payment kiosk with easy to use touch interface.

Mr. Bruce Bevan, national sales manager Australia, sends out a warm welcome, stating, “AGE is a key show for Australia and we are proud to be exhibiting here to demonstrate our dedication to the Gaming market. We look forward to welcoming visitors and show our industry-leading solutions. ” SUZOHAPP is getting set for an amazing AGE and is ready to welcome attendees at stand 510.

Asia Gaming Briefings | August 2016

T

ransAct Technologies Inc. will demonstrate their award-winning ticket printers and the Epicentral promotion and bonusing system at the upcoming Australasian Gaming Exhibition. Joining with their International distribution partner Suzohapp, TransAct representatives will showcase and demonstrate the highly acclaimed and award-winning EPIC 950 ticket in/ticket out (TITO) printer, the Epicentral promotion and bonusing system, and their robust and highly reliable Epic 880 Thermal Roll Receipt Printer.

The Epic 950 ticket in/ticket out printer is recognized for its unmatched performance, reliability and compatibility with all new and legacy games, and is installed in over 500,000 slot machines worldwide.

The Epic 950 is loaded with advanced features including TicketBurst technology which eliminates player/ticket interference.

This printer accommodates 200, 600 and 800 count ticket stacks and prints down to the last ticket in the stack. In addition, it is truly “hot swappable” due to its quick disconnect technology which allows seamless removal and install of the printer without powering down the game or detaching cables.

The Epic 950 is fully compatible with TransAct’s Epicentral technology which provides for the real-time delivery of personalized promotions and bonus offers directly to players while they are at the gaming machine.

Additionally, they will feature the Epic 880 thermal receipt printer which is the perfect printing solution for gaming applications such as Video Lottery Terminals, Sports Betting Machines, Fixed Odd Betting Terminals, Amusement with Prizes Machines and Skills with Prizes games.

The TransAct Team can be found at stand 510 at the expo.

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CALENDAR OF EVENTS 54

AUGUST AUSTRALASIAN GAMING EXPO (AGE) 9-11 August 2016 Sydney Exhibition Centre @Glebe Island, Australia www.austgamingexpo.com GAMING, RACING & WAGERING AUSTRALIA 8-10 August 2016 Novotel Darling Harbour, Sydney, Australia www.gamingdownunder.com

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CENTRAL & EASTERN EUROPEAN GAMING CONFERENCE & AWARDS 20 September 2016 Hilton Budapest City, Hungary www.ceegc.eu GLOBAL GAMING EXPO (G2E) 27-29 September 2016 Sands Expo Center, Las Vegas, USA www.globalgamingexpo.com

OCTOBER EUROPEAN IGAMING EXPO (EiG) 18-20 October 2016 Arena Berlin, Germany www.eigexpo.com RUSSIAN GAMING WEEK SOCHI 27-28 October 2016 Sochi, Russia www.rgwsochi.ru/en EAST MEETS WEST REGULATORS SUMMIT 26-28 October 2016 El Nido Pangulasian Island, Philippines Email: enquiries@agbrief.com IAGR ANNUAL CONFERENCE 31 Oct - 3 Nov 2016 ParkRoyal Darling Harbour Hotel, Sydney, Australia www.iagr.org/sydney2016

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NOVEMBER

MACAO GAMING SHOW (MGS) 15-17 November 2016 The Venetian Macao www.macaogamingshow.com ASIAN GAMING SOCIAL 15 November 2016 The Venetian Macao www.facebook.com/AsianGamingNetworking MALTA iGAMING SEMINAR (MiGS) 15-18 November 2016 Corinthia Hotel St George’s Bay, Malta www.maltaigamingseminar.com

SUMMIT OF IGAMING MALTA (SiGMA) 16-19 November 2016 Intercontinental Arena, Malta www.maltaigamingsummit.com BALKAN ENTERTAINMENT & GAMING EXPO 23-24 November 2016 Inter Expo Center, Sofia, Bulgaria www.balkangamingexpo.com

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LAST WORD

Political clouds gather in Australia, Philippines

58

Sharon Singleton

Managing Editor, AGB

It’s not the first time we’ve had cause to write about the impact of politics on Asia’s gaming industry and it’s unlikely to be the last.

O

ver the past two years the gaming news headlines have been dominated by the fallout from Beijing’s decision to crackdown on corruption, triggering a collapse in Macau’s VIP industry which was mostly divorced from the laws of supply and demand.

Now the shadow of political change is hanging over the gaming sectors of Australia and the Philippines.

At the time of writing, the ultimate conclusion to Australia’s election is still unclear, but what looks certain is that committed anti-gambling campaigner Nick Xenophon will have a strong influence, possibly in both the Senate and the House of Representatives.

He made his name crusading against gambling and this still forms a significant part of his policy platform. He has been particularly harsh on corporate bookmakers, claiming they are getting away with not paying enough tax.

According to a research note from CLSA, Xenophon’s policies on wagering are the least controversial and therefore mostly likely to be passed. Those most hit would be bookmakers who have been seeking the liberalization of the online gaming market to include in-play betting.

Some of the reforms outlined by Xenophon were already in the works following the recommendations of the O’Farrell report earlier this year which, in the eyes of many in the industry, marked a major failure for Australia to take the lead in online regulation and bring its industry in line with standards in Europe.

He wants an overhaul of outdated online gambling laws to take into account emerging technologies; an end to sports betting ads during games and an end to micro-betting on sports events, which he says can lead to corruption and match fixing in sports.

“We see this as a positive for Tabcorp and Tatts given it’s likely to slow down corporate bookie customer acquisition and therefore market share gains by the competition,” CLSA said.

However, the brokerage said Xenophon may find it harder to push through his hardline on pokies. He wants the immediate implementation of the Productivity Commission’s recommendation for $1 maximum bets per spin and $120 in hourly losses, compared to $10 per spin and $1200 an hour. He also wants to remove all ATMs from pokies venues.

“If successful (that’s still a big if in our view), there could conceivably be a material impact on EGM revenues for both the local market and casinos, with the biggest impact likely to come from a ban on addictive features, such as near misses and free spins,” CLSA said.

However, on the upside, suppliers such as Aristocrat and Ainsworth may get a boost in the medium-term from replacements to meet new requirements. Longer term they will be hit by lower revenue.

Sydney based Edward Beesley, a strategy consultant of TSoK Consultancy who recently joined forces with Toby Oddy to manage a new business venture, Digital Fuel Innovations, said there is growing anti-gambling

Asia Gaming Briefings | August 2016

sentiment in Australia. But he warned that a piecemeal or heavy-handed approach will force Australians to find other places and means to bet.

“With the election over it provides ample opportunity to take stock, stand back and take a broader look at online betting, animal welfare, pokies and what is needed to minimize the number of people who fall into compulsive gambling; these decisions should not be taken in isolation and require drawn out discussions,” he said.

“Gambling is part of the Australian life. It seems a fashionable agenda to try and destroy it instead of responsibly lead by example.”

Another blow to the industry came from New South Wales, where the government blindsided the territory’s greyhound racing industry in July by imposing a total ban. The move followed an inquiry which found overwhelming evidence of animal cruelty. The move was later followed

by ACT, the capital territory.

“The greyhound ban in NSW along with the Point of Consumption tax in South Australia were bolts out of the blue, regardless as to whether you agree or disagree with the politics, the impact on revenues, jobs and communities needs managing and discussing properly, not random announcements made in apparent isolation,” Beesley said.

Greyhound Racing NSW said it was devastated by the decision, and emphasized its work over the last year to improve the industry.

CLSA said the impact on both Tabcorp and Tatts is likely to be minimal as long as other states don’t choose to follow, which at present looks unlikely given Queensland and Victoria said they had no plans to shutter the industry.

However, if others were to follow, Tabcorp could see about 8 percent trimmed from its earnings per share, and Tatts 3 percent, it said.

Meanwhile, the newly elected Philippine President Rodrigo Duterte has sent shockwaves through his country’s online sector, which is currently the only jurisdiction in Asia to have regulated internet gambling.

At present, it’s not entirely clear what his ultimate policy will be, though speculation is that the focus will be more on inward facing operators, rather than outward facing businesses operating through the Cagayan zone.

Duterte’s announcement sent shares in listed online gambling operator PhilWeb into an immediate tailspin. The firm, which operates internet cafes across the country, has been given an extension of its license until August 10th, but after that it’s future is unclear.

Although we need further clarity, the announcement will be a major backward step for the online industry, which had been hoping for more regulation to legally tap into the huge potential -- not less.

Still, it’s not all doom and gloom on the regulatory front. A framework bill for Vietnam’s casino industry that appeared to have been stalled has suddenly lurched forward again and has been submitted to parliament for discussion. The long-awaited legislation is expected to allow locals to gamble and will reduce the minimum investment required for investment in a casino resort by half.

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