CasinoCityTimes.com

Gurus
News
Newsletter
Search News Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Related Links

Gaming News

 

Asia Entertainment & Resources Ltd announces Q4 and full year 2012 financial results

27 March 2013

HONG KONG -- (PRESS RELEASE) -- Asia Entertainment & Resources Ltd. (“AERL” or the “Company”) (NASDAQ: AERL), which operates through its subsidiaries and related promoter companies that act as VIP room gaming promoters, today announced unaudited financial results for the three months and year ended December 31, 2012. All currency amounts are stated in United States dollars. Please refer to the Annual Report on Form 20-F that will be filed with the Securities and Exchange Commission on or about March 28, 2013 for the full audited financial statements and related disclosures for the year ended December 31, 2012.

Fourth Quarter 2012 Highlights

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 December 31, 2012 was $4.1 billion, a decrease of 27% compared to $5.6 billion for the three months ended December 31, 2011
Net income, including the change in fair value of contingent consideration of $0.1 million related to the King's Gaming and Bao Li Gaming acquisitions, decreased 38% to $10.1 million or $0.24 per share (fully diluted) in the fourth quarter of 2012 from $16.3 million or $0.38 per share (fully diluted) in the same period of 2011.
Non-GAAP 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 was $12.6 million or $0.30 (fully diluted) for the three months ended December 31, 2012 as compared to income of $19.8 million or $0.46 (fully diluted) for the three months ended December 31, 2011. The decrease in Non-GAAP income was approximately 36%.
In the fourth quarter 2012, the Company repurchased and retired 1,011,600 shares at an average price of $3.15 per share. The Company purchased the maximum number of shares pursuant to its then-existing share repurchase program in the first quarter of 2013 and announced a new share repurchase program to purchase up to an additional four million of its ordinary shares on the open market at prices to be determined by the Company’s management. The program commences on the second business day after today’s release of the Company's financial results for the year ended December 31, 2012 and expires on December 31, 2013.

Full Year 2012 Highlights

Rolling Chip Turnover for the year ended December 31, 2012 in the Company’s VIP gaming rooms was $18.1 billion, a decrease of 9% compared to $19.9 billion for the year ended December 31, 2011.
Net income, including the change in fair value of contingent consideration of $15.2 million related to the King's Gaming and Bao Li Gaming acquisitions, decreased 9% to $70.1 million or $1.66 per share (fully diluted) in the year ended December 31, 2012 from $77.3 million or $2.00 per share (fully diluted) for the year ended December 31, 2011.
Non-GAAP 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 was $61.6 million or $1.46 per share (fully diluted) for the year ended December 31, 2012, as compared to income of $76.1 million or $1.97 per share (fully diluted) for the year ended December 31, 2011. The decrease in Non-GAAP income was approximately 19%.

The decrease in net income and Non-GAAP income for the three months ended December 31, 2012 was due primarily to decreased Rolling Chip Turnover and a lower-than-average win rate for November and December of 2012. Revenue was previously generated by a fixed commission of 1.25% of Rolling Chip Turnover; however, beginning in September 2012, revenue began to be generated through sharing in wins and losses with the Casino Operators, which increases the volatility in the Company’s revenues.

The decrease in net income and Non-GAAP income for the year ended December 31, 2012 was due primarily to lower revenue generated from decreased Rolling Chip Turnover as a result of the economic slowdown in parts of Mainland China. In order to control credit exposure, the amounts of markers made available to junket agents were reduced, negatively impacting the growth in Rolling Chip Turnover. Rolling Chip Turnover generally is correlated with the availability of cage capital that can be made available for credit to junket agents.

“Despite the lower year-over-year results we believe we managed 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. “The tightening of credit to junket agents had a near-term impact on our overall performance that we expect will reverse as a result of improvement in the Chinese economy. To that end, as of September 2012, we shifted our remuneration model away from a fixed commission model to a revenue sharing model, which should allow us to improve our competitiveness in the market and hopefully increase our net income and Non-GAAP income. We remain committed to growing our business presence in the Macau VIP gaming market and continuing to create value for our shareholders.”

Outlook for 2013

For the first two months of 2013, AERL’s Rolling Chip Turnover was US$2.55 billion (an average of $1.28 billion per month), down 29% year-over-year, compared to US$3.62 billion (an average of $1.81 billion per month) for the first two months of 2012. Win rate for the first two months of 2013 was 3.89%.

In view of the tightening of credit to junket agents, the Company is providing 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 with 2012 results.

The Company believes that for the remainder of 2013, all of its business will remain on a revenue sharing basis. The Company is also providing 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.



Definition of Rolling Chip Turnover

Rolling Chip Turnover is used by casinos to measure the volume of VIP business transacted and represents the aggregate amount of bets players make. Bets are wagered with “non-negotiable chips” and winning bets are paid out by casinos in so-called “cash” chips. “Non-negotiable chips” are specifically designed for VIP players to allow casinos to calculate the commission payable to VIP room gaming promoters. Commissions are paid based on the total amount of “non-negotiable chips” purchased by each player. VIP room gaming promoters therefore require the players to “roll,” from time to time, their “cash chips” into “non-negotiable” chips for further betting so that they may receive their commissions (hence the term “Rolling Chip Turnover”). Through the promoters, “non-negotiable chips” can be converted back into cash at any time. Betting using rolling chips, as opposed to using cash chips, is also used by the DICJ (Macau Gaming Control Board) to distinguish between VIP table revenue and mass market table revenue.

About Asia Entertainment & Resources Ltd.

AERL is a holding company which operates through its subsidiaries and related promoter companies as a VIP room gaming promoter, and is entitled to receive all of the profits of the VIP gaming promoters from VIP gaming rooms. AERL's VIP room gaming promoters currently participate in the promotion of four major luxury VIP gaming facilities in Macau, China, the largest gaming market in the world. One VIP gaming room is located at the top-tier 5-star hotel, the Star World Hotel & Casino in downtown Macau, and another is located in the luxury 5-star hotel, the Galaxy Macau™ Resort in Cotai, each of which is operated by Galaxy Casino, S.A. Additional VIP gaming rooms are located at the Sands Cotai Central and City of Dreams Macau, both in Cotai.

< Gaming News