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Asia Entertainment & Resources Ltd. announces Q1 2013 financial results

24 May 2013

(PRESS RELEASE) -- Asia Entertainment & Resources Ltd. (“AERL” or the “Company”) (AERL), which operates through its subsidiaries and related promoter companies that act as VIP room gaming promoters, today announced unaudited and unreviewed financial results for the three months ended March 31, 2013. All currency amounts are stated in United States dollars.

First Quarter 2013 Highlights and Subsequent Events

  • Rolling Chip Turnover (a metric used by casinos to measure the aggregate amount of players’ bets and overall volume of VIP gaming room business transacted, which is further defined below) for the three months ended March 31, 2013 was $4.1 billion, a decrease of 24% compared to $5.4 billion for the three months ended March 31, 2012.

  • Net income, including the change in fair value of contingent consideration of $5.9 million related to the King’s Gaming and Bao Li Gaming acquisitions, decreased 55% to $7.0 million, or $0.17 per share (fully diluted), in the first quarter of 2013 from $15.3 million, or $0.36 per share (fully diluted), in the same period of 2012.

  • Non-GAAP income, which is operating income before amortization of intangible assets and the change in fair value of contingent consideration related to the acquisitions of King's Gaming and Bao Li Gaming declined 17% to $15.3 million, or $0.38 per share (fully diluted), for the three months ended March 31, 2013 as compared to income of $18.4 million, or $0.43 per share (fully diluted), for the three months ended March 31, 2012.

  • In the first quarter of 2013, the Company repurchased and retired 726,053 shares at an average price of $3.76 per share. The Company also initiated a new purchase program on March 27, 2013 for the purchase of an additional four million of its ordinary shares. The new plan expires on December 31, 2013.

  • On May 20, 2013, the Company entered into a non-binding memorandum of understanding, whereby it will acquire all of the outstanding interests and operations of the VIP gaming room at Level 1 of Le Royal Arc Casino located in NAPE, Downtown Macau, promoted and operated by Mr. Wong Wing Yim (the "Seller"). The Seller promotes and operates the VIP gaming room which has six tables and is served by at least 500 agents. The VIP gaming room is operated under the Sociedade de Jogos de Macau S.A.'s concession. Subject to due diligence and customary closing conditions, AERL expects to close the transaction by June 30, 2013.

The decrease in net income and Non-GAAP income for the three months ended March 31, 2013 was due primarily to decreased Rolling Chip Turnover, higher commissions as a result of greater non-marker commission paid, the upward adjustment to commission rates as a result of the company compensating its junket agents for no longer providing complimentary hotel and casino services, and a smaller percentage of direct business, and higher selling, general and administrative expenses to reflect the additional management fees paid after the acquisition of an additional VIP gaming room and higher promotional expenses The decrease in revenues was partially offset by a higher win rate, an increase in services revenues related to hotel and casino services charged to junket agents after the adjustment to commission rates.

“We continue to manage our business appropriately to reduce exposure to undue risk that can impair longer-term growth,” said Mr. Man Pou Lam (Mr. Lam), Chairman of AERL. “We have started to experience stabilization in the VIP gaming market which should have a positive impact on our overall long-term performance. Further, our shift to a revenue sharing model is allowing us to improve our competitiveness in the market, with the ultimate goal of increasing market share leading to growth in revenue and net income. We remain committed to growing our business presence in the Macau VIP gaming market as evidenced by our recent announcement regarding Le Royal Arc Casino and remain committed to creating long-term shareholder value.”

Outlook for 2013

For the first three months of 2013, AERL’s Rolling Chip Turnover was $4.08 billion (an average of $1.36 billion per month), down 24% year-over-year, compared to US$5.38 billion (an average of $1.79 billion per month) for the first three months of 2012. Win rate for the first three months of 2013 was 3.29%.

In view of the tightening of credit to junket agents, the Company maintains its Rolling Chip Turnover guidance for its four existing VIP rooms in Macau of $1.5 billion per month in the aggregate (subject to monthly fluctuations), which equates to a total of $18 billion in the aggregate for full year 2013, which is comparable to 2012 results.

The Company believes that for the remainder of 2013, all of its business will remain on a revenue sharing basis. The Company maintains its Non-GAAP income guidance for the year ended December 31, 2013 of $60 million to $75 million based on the current and expected performance of its existing four VIP gaming rooms in Macau, and does not take into consideration any possible future expansion or additional VIP gaming rooms.

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