Entertainment Gaming Asia’s transition from Asian casino slot machine supplier to social gaming developer is (for the moment) developing little more than a lotta red ink.
On Monday, Entertainment Gaming Asia (which goes by its NASDAQ acronym EGT) reported a net loss of $6.7m on revenue of just $357k in the three months ending December 31, 2016. Full year revenue came to $2m while net losses totalled $9.7m. Net losses from continuing operations were $2.4m in Q4 and $5.3m for the year.
For the past couple years, EGT has been undergoing a full-body makeover that has seen the company ditch its own Cambodian gaming halls and scrap its electronic gaming machine leasing deals with other Cambodian casinos. EGT also sold off its Dolphin Products casino chip and plaque manufacturing business.
That left EGT with only its Philippines-based slots operations, which underwent their own contraction last year after EGT sold off the 154 machines it had been leasing to Leisure World VIP Slot Club. At present, EGT operates only around 400 machines in the Philippines.
In 2016, EGT announced plans to reinvent itself as a social gaming operator. The company launched its inaugural product, City of Games, last August. EGT’s social gaming division reported revenue of $7k in Q4 and $8k for the year, while the division’s costs hit $120k in Q4 and $197k in FY16.
EGT CEO Clarence Chung acknowledged that the slow ramp-up of its social gaming business has had “a negative impact on our cash flow.” However, the divestment of its other businesses has left EGT sitting on a cash pile of around $32m and zero debt, and Chung said the company continues to explore ways of utilizing that cash to get EGT back in black.
EGT is majority owned by the Lawrence Ho-controlled Melco International Development Ltd, the majority shareholder in Asian casino operator Melco Resorts & Entertainment (formerly known as Melco Crown Entertainment). Ho made this year’s Forbes rich list with an estimated net worth of around $1.7b, so it’s safe to say he can let EGT go on losing a while longer until the company finds its feet.
