Is there another Casino stock you know of with numbers like these:

  • Return on equity 26.5%
  • P/E ratio 6.6
  • Free Cash Flow margin 15.4%
  • Revenue growth 31%
NagaCorp claims to be one of the world's most profitable gaming companies, and the largest gaming entertainment company in the Mekong Region (Cambodia). Its wholly-owned subsidiary NagaWorld owns, manages and operates Phnom Penh's only integrated hotel-casino entertainment complex, which owns a casino license with a 70-year tenure (until 2065) and a 41-year monopoly within a 200 km radius of Phnom Penh (until 2035). Phnom Penh is the capital of Cambodia.

That is what I call a "Moat"

"owns a casino license with a 70-year tenure (until 2065) and a 41-year monopoly within a 200 km radius of Phnom Penh (until 2035). "

Transparency aligned to global best practices

Its founder and controlling shareholder Dr. Chen Lip Keong's emphasis on managing a "First-World Company in a Developing Nation" with transparency and compliance aligned to global best practices sets the standard of governance for the Company; in addition, over the years, the Company's achievement of strong financial success has declared high annual dividends and delivered growth to its shareholders.


NagaCorp has a zero-tolerance policy with regards to involvement in corruption or bribery of any kind. An anti-corruption handbook is made available to all employees.

Read their 2019 annual report - and you will see they are very transparent. It is a pleasant surprise - not what I was expecting at all.

Is NagaCorp Ltd. (HKSE:3918) the thing real?

With Covid-19 running rampant, I was not about to jump on a plane to Cambodia and check it out - so I turned to YouTube.

So it looks like there is a real casino there - that is good. Now lets dig in deeper. You should check out the casino's website as well.

Fast consistent growth

Source: 2019 Annual Report for NagaCorp Ltd
Source: 2019 Annual Report for NagaCorp Ltd
Source: 2019 Annual Report for NagaCorp Ltd
Source: 2019 Annual Report for NagaCorp Ltd

Source: 2019 Annual Report for NagaCorp Ltd

Cambodia - a fast growing economy

The International Monetary Fund is projecting real gross domestic product growth of 7.0% in 2019 and 6.8% in 2020, with an inflation rate of 2.3% in 2019 and 2.5% in 2020.

Source: IMF – World Economic Outlook Database October 2019

The National Bank of Cambodia is projecting that Cambodia’s real economic growth will be maintained at an average of 7%, with an inflation rate of 2.3% in 2020.

About Cambodia

Cambodia is a favorable tourist destination with good connectivity and network of international flights between both South East Asian and North Asian (especially Chinese) markets.

In the first 11 months of 2019 international arrivals increased by 8% to 5.9 million visitors. China continues to be the leading source of visitors to Cambodia, growing by 20% to 2.2 million visitors in the first 11 months of 2019.

Visitors from South East Asian countries increased by 9%, with Indonesia and Thailand (combined population of about 342 million) registering growth of 22% and 25%, respectively. The top three sources of arrivals – China (37%), Vietnam (14%) and Thailand (7%) – collectively accounted for 58% of total visitation to Cambodia.

The increase in international arrivals into Cambodia was driven by the country’s political stability, an abundance of business opportunities in an emerging market, and increasing appeal as a travel destination. Chinese arrivals to Cambodia of about 2.2 million visitors in the first 11 months of 2019 (mainly driven by business-related travel) represents a small percentage of the potential opportunities. Cambodia is targeting to attract at least 5.5 million Chinese tourists by 2025 according to an article in The Commercial News dated 15 January 2019.

NagaWorld has opened in 3 stages (stage 3 still to open and should double capacity when it does), which explains the growth in the past. The projected growth in visitors explains the likely growth in the future. Can you believe it, most of the 2.2 million visitors to Cambodia from China were business related. Wow.

Vastly different win rates between market segments

I was interested to see the different win rates between the Mass Market and the VIPs.  

Even more interested to see the difference in revenue between the segments balances out the gross profit contributed by each segment.


Everything But Arms

The European Union (EU) might fully or partially remove Cambodia’s tax-free access under the “Everything But Arms” agreement. If Cambodia must deal with the full force of an EBA removal, it could result in thousands of manufacturing jobs being lost and cause exports to the EU to fall sharply. This would hurt Cambodia’s GDP growth and force the government to divert scarce resources at its disposal to provide relief to those individuals and industries most affected.

Dependence on China

China’s economy might slow impacting tourism flows from China. It could also prompt the Chinese government to adopt a more restrictive approach to capital outflows. This would not affect Chinese direct investment in Cambodia infrastructure projects, which are strongly supported by the Chinese government. However, it could make it more difficult for private Mainland Chinese to buy condominiums in Cambodia, hurting this end of the real estate market and the construction industry.

Adverse external conditions could cause Cambodia’s real GDP growth to slow in 2020. The deceleration will probably be only moderate, but if the external shocks turn out to be more severe, it could pose a new challenge for the government, which lacks experience in managing through slower growth conditions in a highly-leveraged environment.

Staff Unrest

Thousands on strike over pay at Cambodian casino NagaWorld
Thousands of Cambodians working for a Hong Kong-listed casino company have gone on strike for higher pay and better working conditions, they said on Thursday.

There seems to be some staff unrest recently. Workers have been striking to almost double their pay to USD$500 a month. When you think that tourism is such a labor intensive industry, this level of wages is definitely an advantage for NagaWorld compared to wages paid in more developed nations.

NagaCorp Ltd. (HKG:3918) provided its workers a range of benefits like free meals and training as well.


Corona Virus has caused the closure of NagaWorld which will no doubt severely impact their growth and profitability this year. But Covid-19 will pass and I see no reason why NagaWorld should not resume its healthy growth.

I have no special insight into the spread of Covid in Cambodia, so I will just link to a few articles I read so you can judge for yourself.

In Phnom Penh, Nagaworld lockdown means casino workers are suffering

New opportunity in Russia

Cambodia is south of China and now NagaCorp is trying to repeat its success in Vladivostok, Russia - just north of China and directly opposite Japan.

Google Maps

Russia President Vladimir Putin banned gambling everywhere in 2009, with four special exemptions: Altai, Krasnodar, Kaliningrad, and Primorsky Krai. The latter was targeted to become Russia’s very own version of the Las Vegas Strip.

Vladivostok is in Primorsky Krai.

More than a decade since the Primorye Integrated Entertainment Zone was designated as a future gaming and tourism hub, only one casino is in operation.

So NagaCorp will not have an exclusive license like they do in Cambodia, but only one other competitor at this stage who has not been able to execute well.

Chen (NagaCorp founder) believes the Vladivostok gambling zone is ripe for investment, and one not unlike what he did in Cambodia a quarter of a century ago. The billionaire says Naga Vladivostok should open sometime in 2021.
NagaCorp Chairman Tim McNally told investors last year, “It’s a new challenge, a different experience in terms of operating environment, but we’ll have a similar approach as we did in Cambodia.
One of those opportunities is Japan, as NagaCorp is expected to seek licensure or some sort of consortium partnership on one of the three integrated resorts.

The Primorye Gambling Zone won’t remain a one-casino town much longer, claim area officials. Primorsky Krai Acting Vice Governor Konstantin Shestakov, who is in charge of economic business development and tourism for the federal subject area, says more resorts are on the way.
During a recent trip to Tigre, Shestakov said he expects there will be 11 casinos in the Primorye Gambling Zone in operation by 2023. And there could be many more.
One investor is Cambodia’s NagaCorp – a hotel, leisure, and gaming company that owns and operates the NagaWorld integrated resort in its native country. NagaCorp is building a $350 million casino named Primorsky Entertainment Resort City that is scheduled to open next year.
In May of 2018, NagaCorp announced it was teaming with Chinese construction conglomerate Dongfang Group to build a 235-mile high-speed railway linking Primorye to Mudanjiang. Russia’s version of Las Vegas will depend heavily on visitors from neighboring China, where gambling is illegal everywhere except Macau and the government-run lottery.

Smart, building a railway to bring Chinese gamblers across the border and into the new Casino.

So apart from the growth coming out of Cambodia, NagaCorp has this new opportunity in Russia where they are going to try and repeat their Cambodian success.

So how much are these shares worth?

I am going to calculate the intrinsic value using the following estimates (I am going to ignore the effect of Corona Virus for now and make a deduction at the end).

Free Cash Flow Growth 25%

This is a bit tough to estimate because they are pouring money into the construction of NagaWorld Stage 3 and the new casino in Vladivostok, Russia which distorts the Free Cash Flow numbers. Feel free to raise or lower this estimate as you see fit.

Free Cash Flow $400 million

Again this is hard to estimate with the new construction distorting their cash flow figures

Discount Rate 20%

I used a discount rate of 20% for the first 10 years followed by 3% each year after that. 20% might seem high, but I felt I needed a high discount rate to compensate me for the risk of the unknown. Geopolitical with Russia, China, Cambodia, North Korea and also the Corona Virus risk.

Buffett Books Intrinsic Value Calculator

So that gave me an intrinsic value of $2.14 a share before deducting anything for the cost of dealing with Covid-19.

QuickFS shows the Trailing 12 months total operating expenses as $532 million. If we assume they do nothing to reduce costs and get no revenue for 12 months that would be a cost of $532 million. Divide that by the 4,341 million shares on issue and you get a Covid cost of 12 cents a share.

Intrinsic value calculated above                           $2.14

Less Covid Cost                                                        $0.12

Covid Adjusted Intrinsic Value                              $2.02

Current Share price                                                  $1.12

Margin of safety                                                        $0.90


With a 90 cent margin of safety after accounting for a year's worth of Covid expenses, I am going to slowly add NagaCorp to my portfolio.

You should do your own calculations and make your own risk adjustments. There are a lot of unknowns and some big assumptions in this calculation - specifically the $400 million cash flow and 25% cash flow growth rate for the next 10 years.

Not Investment Advice

As always, this is not investment advice. You should do your own research. You should consult your professional advisors.