Pan-Asian gaming company Entertainment Gaming Asia Inc (EGA) will sell 670 of its electronic gaming machine (EGM) seats placed at NagaWorld casino in Phnom Penh to an unnamed Cambodian firm for $2.5 million, the Nasdaq-listed company announced on Wednesday.
The sale terminated EGA’s existing lease agreement with NagaWorld just four months into the contract, which was drawn up when an earlier profit-sharing agreement ended on February 29.
“Prior to the sale, [EGA] had leased EGMs to NagaWorld and that arrangement was terminated effective June 30, 2016 in connection with the sale transaction,” the company said.
It added that the unnamed purchaser had agreed to pay the full $2.5 million in cash upon completion of the transaction, which was expected imminently.
The identity of the purchaser was not disclosed. However, an industry insider said he was not aware of any existing casino in Cambodia – besides NagaWorld – with enough floor space and sufficient cash on hand to carry out the large transaction. He suggested the purchase could be to stock a new Chinese-backed, multi-storey casino currently under construction in Sihanoukville.
Under the now-defunct lease agreement, NagaWorld was required to pay a fixed-rate of $20 per machine seat per day to EGA, amounting to about $400,000 per month. The daily rate was due to drop to $18 in September.
The contract had no expiry date, but required NagaWorld to give at least one-month’s notice to terminate the agreement. It is not clear what EGA’s termination obligations were; however, a clause allowed the company to end the deal if NagaWorld failed to honour the deal.
EGA’s announcement of the sale of gaming machines at NagaWorld coincided with a disclosure that the company had sold all 154 of its EGM seats placed at a casino in the Philippines to the venue owner for $750,000, of which 70 per cent had already been paid.
EGA chairman and CEO Clarence Chung said in a statement that the $3.25 million acquired through the two sale transactions would provide liquidity for the company to pursue growth opportunities.
“While the exit from two EGM leasing contracts will have a negative impact on our near-term cash flow, we believe the cash proceeds of the sales will further enhance our ability to pursue new growth opportunities that will fuel long-term growth for the company,” he said.
Prior to these sales, EGA had placed a total of 1,546 EGM seats at six venues in Cambodia and the Philippines. Apart from the 670 gaming machine seats at NagaWorld, the company has placed another 71 EGM seats at the Thansur Bokor Highland Resort in Kampot province, and about 260 seats in a slot hall it operates at the DreamWorld Club in Poipet.
EGA reported $5.2 million consolidated revenue during the first quarter of 2016, with $3.9 million derived from gaming operations.
Both EGA and NagaWorld did not respond by press time to requests for clarification on the sale transaction.