Yesterday Entertainment Gaming Asia Inc (EGT) announced it had entered into a new casino development project in the Kampot region of Cambodia, close to the border with Vietnam. The company has stated that it is seeking to become the leading owner and operator of regional casinos in the emerging IndoChina gaming markets and that the new project is a strategic incremental step in EGT growth plans.

The casino, which will be operated under the Company’s ‘Dreamworld’ brand, will include table games such as baccarat, roulette and dice games as well as electronic gaming machines. The initial phase of the casino is expected to be opened in the fourth quarter of 2011, subject to the timely issuance of the required gaming license, with up to 14 table games and 25 electronic gaming machine seats. Depending on demand and the availability of capital, the Company may add at a future date additional casino floor space and equipment as well as complementary facilities such as hotel rooms, a spa and other entertainment amenities.

The casino will be located on land close to a busy border checkpoint and will draw customers from major cities in the area. The project is a joint venture for the sole purpose of operating the casino and Entertainment Gaming Asia will have a 67% interest. The other 33% will be held by a local partner. Under the terms of the shareholders agreement, the joint venture company (JVC) will apply for its own casino licence and the local partner will lease to the JVC the land for a period of 25 years for an annual fee of $1. In return, the company will make a one-time lump sum payment to the local partner in the amount of $260,000 and will fund the development, construction and operation of the casino on the land.

Entertainment Gaming Asia will have exclusive management rights and control over the development and operation of the casino, and management and voting control over the JVC. The Company and the local market partner will share the net revenue of the JVC (the total gross revenue of the casino less any payouts paid to customers, operating expenses, and gaming and non-gaming taxes on the JVC’s revenue) on a 60/40 basis, respectively. The initial project term is 25 years with renewal options.

Development of the casino is subject to the JVC’s receipt of the required gaming license and relevant construction permits, for which the JVC is in the application process. Capital expenditures for the initial phase of the casino are projected to be less than $1 million as the electronic gaming machines will be sourced from the Company’s existing inventory. The capital expenditures for the initial phase will be funded by the Company's cash on hand, which had reached approximately $12 million as of February 28, 2011.

Clarence Chung, Chairman and Chief Executive Officer of Entertainment Gaming Asia, commented, “We are making solid progress in implementing our new growth strategy with the goal of becoming the leading owner and operator of regional casinos in select emerging gaming markets in Asia. We believe this strategic new project provides the potential for near-term earnings and long-term growth while further establishing our footprint and the “Dreamworld” brand in our target markets.” (E-03.09.11)

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