Most China tourists just love casinos
Published on: Tuesday, April 16, 2019
By: David Thien
KOTA KINABALU: Well-heeled and travelled China tourists find nightlife in the State capital unexciting, and some of them pine for a casino visit, according to some tourist guides.
“What can enthral them for hours at night is a flashy casino and all its attractions which Sabah lacks despite all the so-called sports and recreation clubs with slot machines,” said nature guide Simon Chin.
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This was already anticipated years ago when the rich China tourists throng casinos around the world to try their luck, but a request for Sabah for a casino licence was ignored.
In the past, some in Sabah suggested that a casino licence be granted to start one at an island resort, where only tourists are permitted with locals barred from gambling.
This was rejected due to the country’s religious status, although Genting Berhad holds a casino licence and it sits on the Selangor-Pahang border.
Today, the CEO of Genting Berhad Tan Sri Lim Kok Thay’s personal wealth has been overtaken by billionaire Tan Sri Chen Lip Keong who first made his fortune in Sabah’s Karambunai Corp building the seaside resort hotel and homes, and is now worth US$5 billion up from US$1.6 billion as reported recently by The Edge.
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Chen moved to invest in Cambodia from Sabah, where there was no problem to get a casino license, unlike Malaysia, through his NagaCorp Ltd.
He was frustrated with some legal problems in Sabah as some landowners/claimants could file claims in the civil courts, as well as in the religious courts, for land issues deemed settled earlier for his resort.
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Raking in a profit of US$390 million in 2018, NagaCorp paid two per cent taxes or some US$8.8 million (RM36 million) to the Cambodian government.
In comparison, how much tax does Sabah get from the many sports and recreation clubs, if at all? Of the 150 casinos licensed in Cambodia in 2018, NagaCorp is the biggest and Chen currently owns 66.10 per cent of the company’s shares.
An official from the Ministry of Economy and Finance told the media that they expect to collect around US$56 million in total revenue from all casinos for 2018.
It is illegal for the Cambodians to gamble but the country has banked on gamblers from China to grow its economy.
In 2018, China tourists grew in numbers by about two third to over two million, whereas Sabah is still hoping to get a steady stream of at least one million tourists from China.
Meanwhile, Asian casino investor NagaCorp Ltd has confirmed that the firm’s founder and chief executive Chen Lip Keong will provide partial funding for the company’s new extension to NagaWorld casino resort in Cambodia’s capital, Phnom Penh.
Naga 3, aimed at expanding the company’s gaming and non-gaming offerings, will have a total cost of around US$3.5 billion, said the promoter in last Sunday’s filing.
In the latest filing, NagaCorp stated that it had – after consultation with project appraiser and consultant Colliers International (Hong Kong) Ltd – “ascertained that the total development costs of Naga 3 to develop total gross floor area of 544,801 square metres (5.86 million sq feet) are at about US$3.5 billion.” The figure excludes land costs.
The casino operator added that it had already entered into what it termed a “guaranteed maximum sum design and build agreement” – capped at US$3.52 billion – with long-time partner, Chinese-owned contractor CCAG Asia Co Ltd, for the development of Naga3. The completion date mentioned in that deal is Sept 30, 2025.
In a filing earlier this month, the firm had said it is expected to invest between US$3.8 billion and US$4 billion in Naga3.
The company stated in its latest filing that it had also decided – “given the limitations from external financing, development risk and based on the advice given by its financial advisers”, namely Credit Suisse (Hong Kong) Ltd and Morgan Stanley Asia Ltd – that “50 percent of this development costs shall be funded by internally generated funds and the balance of 50 percent by the controlling shareholder.” That was a reference to Chen.
NagaCorp said “key advantages” of such founding strategy included “cash advances nil of any interest costs to the company,” and minority shareholders continuing “to enjoy the high dividend policy of the company”.
In addition, Chen would only be “paid upon completion and handing over of a fully operational Naga 3,” NagaCorp noted in its latest filing. “In the event that the development costs exceed US$3.52 billion, the controlling shareholder will bear and pay all costs overrun,” the document added.
As part of the deal, Chen is to receive a total of 1.14 billion settlement shares in NagaCorp.
The settlement shares – to cost a total of US$1.76 billion – will increase Chen’s stake in the company to 73.17 per cent, NagaCorp stated.
NagaCorp has an exclusive licence to operate casinos in Phnom Penh and its surroundings. It started operations with the NagaWorld property, now referred to as Naga 1, which opened in December 2006. That property now links to Naga 2, an expansion that opened in November 2017.
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