Asia Entertainment & Resources Ltd. Announces Rolling Chip Turnover for October 2010
November 03 2010 - 9:07AM
Business Wire
Asia Entertainment & Resources Ltd. (“AERL”) (NASDAQ: AERL,
AERLW), which operates through its subsidiaries and related
promoter companies as a VIP room gaming promoter, today announced
unaudited Rolling Chip Turnover (as defined below) for the month of
October 2010 which includes the Golden Week holiday which started
October 1st. Rolling Chip Turnover for the month of October 2010
for the company’s two VIP rooms in Macau was US$1.147 billion, up
72% year-over-year, compared to US$667 million for the month of
October 2009. Rolling Chip Turnover for the first ten months of
2010 in Macau was US$7.882 billion, up 99% year-over-year, compared
to US$3.951 billion for the first ten months of 2009.
The Company’s VIP rooms are primarily focused on high stakes
baccarat. Baccarat accounts for approximately 88% of total Macau
casino winnings according to the Macau Gaming Inspection and
Coordination Bureau (DICJ). In Macau, two remuneration methods are
used to compensate VIP room gaming promoters. On a fixed commission
basis, VIP room gaming promoter revenues are based on an agreed
percentage of Rolling Chip Turnover. On a win/loss split basis, the
VIP room gaming promoter receives an agreed percentage of the “win”
in the VIP gaming room (plus certain incentive allowances), and is
required to also bear the same percentage of losses that might be
incurred. Compared to the fixed commission basis, the win/loss
split basis subjects the VIP room gaming promoter to the risk of
losses from the gaming patron’s activity and greater
volatility.
In the first nine months of 2009, all of AERL’s business was on
a win/loss split model. However, to reduce the risks of losses and
volatility, at the end of October 2009, AERL successfully
transitioned the VIP room in the Galaxy Star World in Downtown
Macau to a fixed 1.25% commission on Rolling Chip Turnover. During
the first ten months of 2010, the majority of AERL’s business was
on a fixed commission basis. The VIP room at the MGM Grand Hotel
and Casino continues to operate at an approximately 43% (including
certain incentive allowances) win/loss split basis. At this rate,
and assuming a win rate (the percentage that a casino’s win is of
the total amount bet) of 2.9%, AERL would have the same revenues at
the MGM Grand Hotel as if it operated under a 1.25% fixed
commission basis. However, if the win rate was over 2.9%, AERL
would have more revenues than if it operated on the 1.25% fixed
commission basis. For the month of October, the win rate at MGM –
which generates approximately 20% of the Rolling Chip Turnover –
continues to be below the average of 2.9%. Because the larger part
of AERL’s revenues is now directly related to Rolling Chip
Turnover, the Company is concentrating its marketing efforts to
increase the number of patrons and the amount of play at its VIP
gaming room that operates under the 1.25% fixed commission basis.
Consequently, in order to increase the Rolling Chip Turnover, the
Company reinvests its earnings to increase the amount of cage
capital available to finance the increased patron activity. Based
on a statistical average of 3.00%, AERL’s net profit before general
and administrative expenses is typically 0.45% of the Rolling Chip
Turnover.
Under the win/loss split model, AERL’s VIP gaming promoters’
gross win rate as a percentage of Rolling Chip Turnover has
historically ranged between approximately 1.1% and 4.5%. The
industry average gross win rate for Baccarat is approximately 2.85%
to 3.00%. Theoretical win rates for AERL’s VIP gaming promoters’
VIP gaming room operations depend on a variety of factors, some
beyond their control, such as the element of chance that
characterizes the gaming industry. Theoretical win rates are also
affected by other factors, including gaming patrons’ skill and
experience, the mix of games played, the financial resources of
gaming patrons, the spread of table limits, the volume of bets
placed by AERL’s VIP gaming promoters’ gaming patrons and the
amount of time gaming patrons spend on gambling — thus VIP gaming
rooms’ actual win rates may differ greatly over short time periods,
such as from quarter to quarter, and could cause quarterly results
to be volatile. These factors, alone or in combination, have the
potential to negatively impact the VIP gaming rooms’ win rates.
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 to distinguish between VIP table revenue and mass market table
revenue.
About Asia Entertainment & Resources Ltd.
AERL, formerly known as CS China Acquisition Corp., acquired
AGRL on February 2, 2010. AGRL is an investment holding company of
subsidiaries that, through profit interest agreements with
affiliated companies known as VIP gaming promoters, are entitled to
receive all of the profits of the VIP gaming promoters from VIP
gaming rooms. AGRL’s VIP room gaming promoters currently
participate in the promotion of two major luxury VIP gaming
facilities in Macau, China, the largest gaming market in the world.
One of the VIP gaming rooms is located at the top-tier MGM Grand
Macau Casino in downtown Macau that is operated by the MGM Grand
Paradise S.A. The other Macau VIP gaming facility is located in the
luxury 5-star hotel, the Star World Hotel & Casino in downtown
Macau, which is operated by Galaxy Casino, S.A.
Forward Looking Statements
This press release includes forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties.
Forward looking statements are statements that are not historical
facts. Such forward-looking statements, based upon the current
beliefs and expectations of AERL's management, are subject to risks
and uncertainties, which could cause actual results to differ from
the forward looking statements.
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