Entertainment Gaming Asia's CEO Discusses Q3 2012 Results - Earnings Call Transcript

| About: Entertainment Gaming (EGT)

Entertainment Gaming Asia Inc. (NYSEMKT:EGT)

Q3 2012 Earnings Call

November 13, 2012; 08:30 a.m. ET

Executives

Clarence Chung - Chairman & Chief Executive Officer

Andy Tsui - Chief Accounting Officer

Traci Mangini - Senior Vice President of Corporate Finance

Analysts

Paul Sonz - Sonz Partners

Jim Crabbe (ph) - Private Investor

Operator

Ladies and gentlemen, thank you for standing by and welcome to the third quarter 2012 earnings call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions).

I would now like to turn the conference over to Traci Mangini. Please go ahead ma’am.

Traci Mangini

Thank you operator and good morning everyone. I’m Traci Mangini, Senior Vice President of Corporate Finance for Entertainment Gaming Asia. With me today on the call are Clarence Chung, Chairman and Chief Executive Officer; and Andy Tsui, Chief Accounting Officer.

Now before we start please allow me to review the Safe Harbor statement. Some of the statements that the company will make on this conference call, such as statements of the company’s plans and expectations are forward-looking. While forward-looking statements reflect the company’s good faith beliefs, they are not guarantees of future performance and involve risks and uncertainties.

The company’s actual results could differ materially from those discussed on this phone call. Some of these risks and uncertainties are described in today’s news announcement and in the company’s filings with the Securities and Exchange Commission, including the company’s reports on Form 8-K, 10-K and 10-Q. Entertainment Gaming Asia assumes no obligation to publicly update or revise any forward-looking statement.

Now, the agenda for today’s call will be as follows; first, Clarence will discuss the highlights of our third quarter 2012 financial performance and recent corporate developments. Following that Andy will review in more detail the financial results for the third quarter. Clarence will then conclude our prepared remarks with an update on our gaming development plans. We would then be pleased to take your questions.

With that, I’ll turn the call over to Clarence Chung. Clarence.

Clarence Chung

Thank you Traci and good morning everyone. We had a strong top line quarter, however decreased revenue from Cambodia slot operations, combined with higher gaming expenses, related to gaming casino operations resulted in a decline in bottom line earnings.

I would like to discuss some contributing factors to our performance for the quarter in greater detail. Consolidated revenue was up 21% from the same period last year, driven principally by our gaming chips and plaque operations, along with incremental revenues from our new casino operations. Gaming revenue was $4.5 million, which was up 2% from the third quarter of 2011.

Gaming revenue was driven by incremental revenue from our new casino, Dreamworld Pailin, which opened in May of this year, an improvement in our Philippine slot operations. The increase was partially offset by decreased net win from our operations at NagaWorld.

The average net win for our slot operations was $132, down 9% from the prior year period. The decline was principally due to the reduced net wins at NagaWorld during the quarter and the inclusions of our new slot operations at Thansur Bokor, which are still ramping up. The increase was partially offset by improved performance in the Philippines.

Average net wins for our operations at NagaWorld decreased at the third quarter. It fell to $215 compared to $233 in the prior year period. Based on our current information and improved performance on October 2012, we believe that the decline in the third quarter of 2012 net win from these operations was due to normal operation. We are focused on maintaining strong performance on our operations at NagaWorld and believe that with permanent ground floor locations, superior customer service and proactive marketing we are well positioned to do so.

Our newest slot operations at Thansur Bokor officially opened in early May 2012. This flagship property of leading Cambodian Hotelia Sokha Hotel and resort is located in a tourist area of Southern Cambodia. Sokha is still completing certain aspects of the resort such as the VIP gaming area, which we look forward to and is opening in the coming month. We believe that these slot operations will be a meaningful contributor to earnings once the facility is fully operational and Sokha has implemented its broader marketing programs.

In the Philippines, gaming operations delivered solid performance due to targeted marketing program, extended operating hours at certain locations and increased revenue shift, despite adverse weather conditions, which resulted in the closures of one venue for several days and overall reduced player traffics during the periods of heavy rain, revenues and average net win for these operations were upped from the prior year.

Turning to our casino operations, Dreamworld Pailin contributed approximately $340,000 to gaming revenues for the quarter. We initially opened the market floor of the casino with 26 tables and 50 slot machines. We are still ramping up the mass-market floor operations and results are not yet normalized. In September we improved and expanded our senior operations in Dreamworld Pailin and began to implement some new marketing initiations to attract quality players in the surrounding areas.

In addition, we continue to evaluate opportunities to partner with local gaming promoters to open our VIP rooms. We personally expect to open these facilities within the next several months. By utilizing gaming promoters we expect to improve high network player traffic in the VIP rooms, while minimizing the downside risk and volatility as the promoters typically share in wins and losses and assume the credit risk.

From our other products division, we achieved strong top line growth. This division contributed $3.4 million in revenues in the quarter, up 50% compared to $2.1 million in the prior year period. To increase was the result of higher sales of gaming chips and plaques, partially offset by reduced sales from our non-gaming products.

Gaming chips and plaque sales were $1.7 million for the quarter compared to $241,000 in the prior year period and we presented 85% of total gaming chips and plaque sales for the full year 2011.

The third quarter of 2012 gaming chips and plaque revenues includes one large order of $1.6 million. This was an important order from a permanent gaming operator and long time customer. The lead-time for this order was relatively short. In addition, we utilized for the first time new in-house plaque development process that previously has been outsourced and we experienced some non-recurring inefficiency.

These combined factors resulted in higher than anticipated labor and production costs, which resulted in significantly lower than typical gross margin for this order. With our comprehensive product line, with state of the art security features, packed in production capabilities and strong relationship in our target market in Asia and Australia, we remain enthusiastic about the potential for our gaming chips and plaque operation.

Our pipeline for the fourth quarter is promising with announced order for $1.9 million in revenues from new and existing customers. This includes entering the growing Philippine gaming market and supplying the first of the major integrated resorts we opened as part of the entertainment city (ph) in Manila. Further we believe that our expanded market presence and the growth trend for our existing customer relationships, offers strong potential for meaningful future orders for this division.

We are focused on enhancing profitability of this division through continuous efforts to improve our manufacturing capabilities and efficiency, acquire experienced improvement in new in-house production processes and planned force production initiation. We expect to increase operating efficiencies and automations to drive long term earnings growth for these operations.

With reduced slot revenues from our NagaWorld operations and high expenses, primarily related to general operating costs associated with our new casino operations, adjusted EBITDA was $2.3 million and net income was $43,000 for the third quarter of 2012. We maintain a healthy cash balance of $10.6 million as of September 30, 2012, while continuing to pay down debt and investing in our gaming operations.

We’ll talk more about our gaming development project in a moment, but first I would like to turn the call over to Andy to discuss the details of our third quarter financial results. Andy.

Andy Tsui

Thank you Kevin and good morning everyone. Total revenue was $7.9 million for the third quarter of 2012, up 21% compared to $6.5 million in the third quarter of 2011. The increase in revenue was principally the result of improvement in other product business, specifically gaming chip and plaque sales.

Gaming revenue was $4.5 million for the third quarter of 2012, up 2% compared to the $4.4 million in the third quarter of 2011. This quarters gaming revenue includes $4.1 million for our slot operations, formally referred to our participation business and $340,000 for Dreamworld Pailin, which opened on May 9, 2012.

Slot revenue of $4.1 million for the quarter declined 5% compared to $4.4 million in the third quarter of 2011. The decline was primarily the result of lower average win per machine for our operation in NagaWorld, partially offset by improvement in average wins per machine and revenue share for our Philippine slot operation, as well as incremental revenue contribution from our new slot operation at Thansur Bokor in Cambodia.

Consolidated average daily net win per unit for our slot operations was $132, down 9% from the prior year period.

Our installed base of gaming machine seats for our operation as of September 30, 2012 was 1,420 seats, down 5% from September 30, 2011. The decline in machine seats was principally due to our decision to close down three under performed venues, which totaled 232 machine seats during the second and third quarter periods. These declines was partially offset by the opening of Thansur Boko, with approximately 200 machine seats early this year. Some of these machines were sourced from the closed venues.

Slot revenue from Cambodia, which consists primarily of our operations at NagaWorld was approximately $3.3 million for the third quarter of 2012, down 7% from $3.5 million in the third quarter of 2011. The decrease reflect lower average wins per unit at NagaWorld during the quarter.

Average win per unit in Cambodia was $175 for the quarter, down 25% from $233 in the third quarter of 2011. The decline was principally the result of lower average win at NagaWorld and in the crucial new operations at Thansur Boko, which keeps a track on the average win at each operations that are still ramping up.

In the Philippine, slot revenue for the third quarter of 2012 was approximately $831,000, up 3% from the third quarter of 2011 level of $848,000. The increase in revenue was primarily due to improved average wins and our acquisition of a higher revenue share interest in one venue in October 2011. This increase was due to a lower installed machine base and adverse weather condition during the quarter.

Average net win for the Philippine was $74 for the third quarter of 2012, up 9% from $68 in the year ago period. The increase was driven in part by our effort to strategically mange our machine placements, our targeted marketing initiative and extended operating hours.

Our other product divisions, mainly the manufacture and sale of gaming chips and plaques and non-gaming products such as automotive components, contributed approximately $3.4 million in revenue to the third quarter of 2012, up 50% from the year ago period. The increase was due to higher gaming chip and plaque sales of $1.7 million at the third quarter, compared to $221,000 in the prior year period, partially offset by reduced sales of non-gaming product due to weakness in the Australian auto industry.

SG&A expenses of $1.5 million for the third quarter of 2012 was flat with the prior year period. Adjusted EBITDA, which we define as Earning Before Interest, Taxes, Depreciation, Amortization and Non-Cash Expenses was $2.3 million for the third quarter of 2012, which compares to a $2.8 million in the third quarter of 2011.

The decline was principally the result of lower stock revenue from our operation at NagaWorld and higher gaming division cost owing to our chip till operation for our new casino. Net income for the third quarter 2012 was approximately $43,000 compared to $647,000 for the third quarter of 2011.

Turning to the balance sheet, as of September 30, 2012 we have a total of $10.6 million in cash and cash equivalent. This compares to $12.8 million as of December 31, 2011. The decrease in cash balance was the result of the capital expenditure for our casino development projects, gaming machine purchased and to enhance our excising slot operations and principal and interest debt repayment.

We are $1.6 million in debt as of September 30 2012. This compares to $6.2 million as of December, 31 2011. This debt which is held in the form of an unsecured promissory note issued to our largest shareholder, ETT Entertainment Holding Limited, a wholly-owned subsidiary of Nelco International will be repaid in full as of December 1, 2012.

I will now turn the call back over to Clarence to discuss our casino development plans. Clarence?

Clarence Chung

Thank you Andy. With recurring cash flows from our slot operations and good potential for our casino chips and plaques business, we are focused on executing our new casino development strategy. We were pleased to be able to quickly open our first development project, Dreamworld Pailin in May and are diligently working on ramping up these operations. With quality gaming offering, professional management and an inviting atmosphere, we aim to set a new standard for our regional gaming in the market.

We are including our presence in the Pailin market and have a strong operational team in place. In September we implemented a number of new marketing initiatives to build quality and mass-market players traffic and have plans to open the VIP facilities in the next several months.

With broad marketing programs in place and with upcoming plans for the casinos to be fully operational, we expect to establish normalized operating results within the next two to three quarters.

In addition to our focus on ramping up Dreamworld Pailin, we began full construction efforts for our next project, Dreamworld Poipet during the quarter. Dreamworld Poipet will be a stand-alone slot hall with approximately 300 machine seats. It will be developed and operated as an extension of an existing popular casino in the common locations within the most established gaming markets of Poipet.

Leveraging our existing market at present, strong operational team and established systems from Dreamworld Pailin, we believe we have gained valuable experience that will benefit us in the opening and ramped up stages of these new projects.

Construction is moving at a steady pace. We have incurred and committed $4.9 million in CapEx of this total $7.5 million project as of today. We hope that you are following our progress on our website.

Based on the current timeline, we expect the open Dreamworld Poipet in the first quarter of 2013, ahead of the Thai New Year. We also have a casino development project, Dreamworld Kampot in the Kampot province of Cambodia, near the Vietnam border. This project in the peak construction stage phase as previously discussed.

We are focusing our availably resources on the development of Dreamworld Poipet, as this is a more established gaming marker and we have higher near term return expectations for these projects. As a result, we expect to resume development of Dreamworld Kampot in the second half of 2013.

In summary, with recurring cash flows and improved financial cash stability, we believe we have established a solid foundation for growth. We are focused on executing on our casino development strategy and achieving our long terms goals of becoming a leading developer and operator of regional style casinos and gaming values in the emerging gaming markets on Indochina.

Lets now open up the call to your questions. Operator.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Paul Sonz at Sonz Partners. Please go ahead.

Paul Sonz – Sonz Partners

Good evening. I noticed that the quarter-over-quarter the win per day in Naga was down about 16%. I know you said you believe this is a normal fluctuation. Could you discuss how we are doing this quarter?

Clarence Chung

Hi Paul, this is Clarence. Yes, in fact we look at it on a month-to-month basis and you’ll see that Q3 is below the Q1 and Q2. But in October we quickly ramped that up and in fact in October the net win for NagaWorld is about $260. So in fact we are seeing what is kind of a fluctuation and overall in 2012, compared to 2011 the nine months of 2012 is larger than the net win for the WUD for the nine-month effort for 2011.

Paul Sonz – Sonz Partners

I see. And you mentioned that you hoped in the next several months to have the VIP room open in Pailin. Does that mean that you have narrowed the operators down to a few and you are about to pick one or I was trying to – wondering what the delay has been in terms of hiring or partnering with someone from the VIP room.

Clarence Chung

Right. Well, in fact we are not in too hurry if not for the right operator or (inaudible), so that’s why we have been trying to select and on the one hand we are trying to ramp up the March market flow and you take in terms of the turnover, the headcount and the traffic, if its proving satisfactory, if its increasingly satisfactory and on the other hands we also carefully select the (inaudible) and the operators and we are hoping to chose a couple of those operators and we have yet to finalize to solve this.

Paul Sonz – Sonz Partners

Alright. In Bokor, do you have an estimate of when you think that the facility will become fully operational and they will start marketing it heavily?

Clarence Chung

Okay. Well, I think in Bokor its a little bit outside of our control to be honest, because the hotel is owned by Bokor and we are just putting our machines in. In turn we have constant dialog with this Bokor group and I guess for such a major development and in fact that they have their own timeline.

So we have been constantly expressing our wishes that they can, where it moves even faster, but again, it would still take a couple of months for them to come see it. Some other areas like the entertainment complex and the VIP areas and I would say that these probably would take another couple of months.

Paul Sonz – Sonz Partners

Do you feel that they are sort of aiming for the same thing? Well I guess, the Thai New Year is what, in April, is that right?

Clarence Chung

Yes.

Paul Sonz – Sonz Partners

Yes, and so in Cambodia would they be shooting for Chinese New Year, hopefully fully operational in Bokor do you think, which I think is what, that’s in February.

Clarence Chung


Well, obviously I don’t know whether this is the plan, but in fact when they tried to open in May, honestly not all of – May, this year I mean, well not all of the facilities have been opened and I think probably somewhat they want us and they picked the grand opening day, which also is officially opened by the Prime Minister of Cambodia, so indeed. Well I think probably Cambodians, the New Year probably would be one of the days and which also coincides with the Vietnam New Year, sometime in February.

Paul Sonz – Sonz Partners

I got it, okay, all right. And then in terms of how much cash do you need from starting in this quarter going forward for finishing above that. I’m trying to understand. I know that the total cost is a little over $7 million. I just wondered how much of that has already been spent and how much is left to be spent?

Andy Tsui

Paul, this is Andy. Well, I think it would be approximately four to five, because we started some commitments for machine purchases in Q4. So we expect, actually to pay out a little bit more in the fourth quarter and the first quarter of 2013. So I would say around four to five.

Paul Sonz – Sonz Partners

All right, so and you see that’s evenly split $2.5 million in each quarter, the fourth and the first.

Clarence Chung

Yes, something like that.

Paul Sonz – Sonz Partners

Okay, and then one last question, the SG&A was up and not for the quarter-to-quarter but on the nine months and would you just comment a little bit on that.

Clarence Chung

Paul, basically the increase is part of our increase with operation in various sites, as well as particularly in timing like relative in Bokor, as well as in the Cambodia area in general. So it seems like in the third quarter we went back to our normal rates, run rates, around $1.5 million, $1.6 million.

Paul Sonz – Sonz Partners

Okay, all right. Well, thank you very much.

Clarence Chung

Thank you.

Operator

(Operator Instructions). Our next question comes from the line of Jim Crabbe (ph) who is a Private Investor. Please go ahead.

Jim Crabbe (ph) – Private Investor

Good morning. In relation with Paul had asked a minute ago, I though I heard you say that you had spent $4.9 million so far on Poipet, is that correct or did I misunderstand that?

Clarence Chung

That’s the amount that we paid and committed as of today. Committed means we have signed contract, but not exactly paid.

Jim Crabbe (ph) – Private Investor

Alright, so there should be another – I see, I got you, okay. And you are still expecting that to cost about $7.5 million, including the building and the machines and all.

Clarence Chung

This is correct.

Jim Crabbe (ph) – Private Investor

Okay, and the Pailin revenue was $340,000 for the last quarter.

Clarence Chung

Yes, correct.

Jim Crabbe (ph) – Private Investor

Okay, so that’s about – I mean that would be a run rate of $1.350 million, $1.4 million. I mean if you just multiply that times four, obviously it would be just…

Clarence Chung

If you calculate based on that, it is, but well the run rate is increasing on a month-to-month basis. So probably if you said simply multiply it by four, it maybe not be the normalized run rate Jim.

Jim Crabbe (ph) – Private Investor

Okay, and you’re looking at a total expenditure on that facility, it was somewhere around $2.5 million.

Clarence Chung

Yes, that’s the CapEx that we spent according to this budget.

Jim Crabbe (ph) – Private Investor

Now, I don’t know if you break this out or not, but is it possible to tell us kind of what your expectations are for margins in a facility like that. In other words, if we are doing, what the total expenses would be, not including depreciation but on a cash basis.

What are you expecting the expenses to be on an individual property or I would suppose I would have to do with a level of revenue of course, but once the things are normalized and you say you are into it for a year, do you expect the expenses for labor and electricity and promotion and the like, which I assume you handle on a property-by-property basis or will. Do you expect a 40% margin or 50% margin of what you eventually expect the revenues to be in these properties?

Clarence Chung

Well, in fact Jim the cost structure is not yet normalized. So I think its probably also I said last time that well it probably would be too early for us to give those numbers, because given the fact that the expenses, especially those areas we spoke and said the marketing force will be to the variable, to the number of headcounts coming in. But we do expect that probably would be, that was a normalized run rate within the next two to three quarters. So probably I think after two or three quarters and the basic cost would be stabilized and normalized and probably would be a much sort of benchmark for the further.

Jim Crabbe (ph) – Private Investor

I think what you just said is in two or three quarters you’ll be able to give us a better idea.

Clarence Chung

You’re right.

Jim Crabbe (ph) – Private Investor

I mean, it looks like the cash was down Clarence about the amount that paid off the debt at. So its – I mean I’m trying to – I guess I’m just trying to get a little bit of a comfort with the stability of the balance sheet. The revenues are increasing at Pailin.

Will you expect Clarence the same kind of returns after a year out of Poipet, given the fact that its all slot machines as opposed to slots and tables, that you’ll get out of Pailin. I mean, do you expect the same kind of returns on your investment and will it be lower at Poipet or higher at Poipet and where you’re looking at it without tables.

Clarence Chung

Well, I guess Pailin, one thing is it is a new business model and it’s a new area that we venture into. And in fact Pailin is relatively not a bit of a mature market as versus to Poipet at the casino market.

So indeed that we expect the Poipet market that would be quite different from Pailin and if fact it also is a slot only venue, but as a table and I guess coupled with one, our experiences in NagaWorld and second is, in particular in the spot area and then second is our experience in Pailin, which Poipet is considered close to Pailin, I guess that we have quite a certain advantage in this respect and also as we understand from the Poipet market, the slot market is also a very good market already. So this is why we view Poipet to be a good and potential market for us.

Jim Crabbe (ph) – Private Investor

Alright, and then just two other quick questions. One is, I believe two conference calls ago I asked you the question, if a good operator, well maybe you added the phrase good operator, but in fact you could do the same kind of numbers at Poipet, that are being done at NagaWorld, and it think you said, yes a good operator, we think can do as good a number as they are doing at NagaWorld, I believe that’s what you said.

And my question is this then, given the fact that and I think that from discussions that I’ve had with other people that there are maybe 3,200 slot machines total, 3,000 slot machines in Poipet, is that about right? We are increasing the number by about 10%. Are our machines significantly different from other machines in Poipet. I mean we upgraded things in Pailin compared to the other casinos if I’m to believe the union gaming note that the fellow issued.

And what I’m curious about is, if in a market of 3,000 slot machines, if we add 300 of them that our notably better than the others, are we likely to have the ramp up time that we would expect say at Pailin or is it likely to ramp up faster and if so, are we likely to attract more participants, just due to the fact that – are we going to have better equipment then, that’s what I’m trying to say.

Clarence Chung

Well no. I think Jim well it was not your question. In fact I think I can say that although there seems to be a lot of machines in Poipet right now, but a lot of those are relatively old machines and you are right that the better performed venues that you can see today are those machines, are those venues with faster and newer machines and that’s why we have advanced and in fact our machines of the newer and better machines compared to most of the existing machines, an important area.

So in this probably you are right in pointing out that in terms of the machines it is, well we consider ours as the – at least newer and of a better quality.

Jim Crabbe (ph) – Private Investor

What percentage of the machines at Poipet are going to be new. I mean my understanding again is that the newer risk machines are maybe $30,000 and you can buy used machines and you can depreciate those in five years and that you can buy machines for maybe less than $10,000 that are good machines. What’s the percentage mix, just to get you an idea of kind of how the depreciation is going to happen there.

Andy Tsui

Hi Jim, this is Andy. In fact we did negotiate a deal with a (inaudible), we’re buying a lager amount of new machines with them. I think our average price can go down to around $20,000 to $25,000 for a new machine rather than $30,000. So roughly speaking, sorry go ahead.

Jim Crabbe (ph) – Private Investor

Yes…

Andy Tsui

Roughly speaking I would say that we have probably around 60% to 70% new machines, of 60% new machines and some from our warehouse and also we buy some good secondhand machines at a discount price.

Jim Crabbe (ph) – Private Investor

Okay, because if I were looking at it, I mean would it be simple to say $12,000, $13,000 average per machine or maybe $14,000 average per machine with maybe an average four-year depreciation schedule.

Andy Tsui

Well, if you look at our financial statement disclosure, average is about four years, because we do depreciate new machine at five years, which have extended the depreciated life and used machine is at three, so the average is like four, yes.

Jim Crabbe (ph) – Private Investor

Okay and maybe an average cost of say $12,000 to $14,000 or would it to be higher than that, probably around 60%.

Andy Tsui

That’s probably right.

Jim Crabbe (ph) – Private Investor

Okay, thank you.

Operator

And we do have a follow up question from the line of Paul Sonz with Sonz Partners. Please go ahead.

Paul Sonz – Sonz Partners

Hi, I wanted to ask you in terms of the chip business, how much visibility do we have, going forward. I saw the estimate for next quarter and I’m wondering whether we could expect our trajectory of revenues and if so what’s the basis for your ongoing assumption for the chip business and the plaque business.

Clarence Chung

Well Paul, I think, well obviously we couldn’t give you the forecast number. But I gave, well indeed we do see good potentials in terms of new casinos opened, either in – well, there are quite some announced project in (inaudible) and then also in Manila Entertainment City there are also new casinos resorts to be built in the coming next two to three years time.

So well, we do see while those are our potential customers and we would expect that we work really hard and try to get if not all, at least certain of those major orders and if that’s the case, that will help us in this division in terms of having major goods in the years of the first supply.

But then as you can see also, the nature of the business in this gaming chip and plaque would be reordered from the existing customers. One, probably it would be replenished or for some new areas or new VIP areas or movers and so forth when they open. So we do anticipate quite a good pipeline potential for these divisions Paul.

Paul Sonz – Sonz Partners

What is the expected like of a chip or a plaque. How long do they last, how often do they have to be replaced?

Clarence Chung

Well its, periodically it can be very long lifed, but then on the other hand while there are, we’ll replenish that – for instance some take that back as souvenirs or over a certain point in time, the expand operations require them to add new rooms, new areas or some change in features that the casino operators that they like and they wanted a even more higher secure chip and plaque for their operations. So there are various reasons for the reorder.

Paul Sonz – Sonz Partners

Has the demand been in general for the higher technology chips that you offer?

Clarence Chung

Well honestly, well this is what we think we are, our niche and in fact we are not trying to compete with the very low cost, low secure chips.

Paul Sonz – Sonz Partners

I see. The last question, one of the things we haven’t discussed is other potential projects that you are looking at in Southeast Asia. Do you have any comment on other projects that you are looking at?

Clarence Chung

Well again, well similar to what I think previously, we constantly look at new projects and I’ll just leave that while there is a – well, some new projects that we are still looking at, but then unfortunately I cannot – well, because its still too premature.

But again, while we are looking at new potential projects, the current focus is also the chance to make the existing projects work even better. For instant the Dreamworld Pailin and also becoming Poipet projects which obviously as we put a lot of the resources and attention at the moment.

Paul Sonz – Sonz Partners

All right. Thank you very much.

Clarence Chung

Thank you Paul.

Operator

And there seem to be no further questions at this time sir.

Clarence Chung

Thank you, thank you operator. We would like to thank you shareholders for their continuing support. We look forward to updating you on our progress in the near future. Thank you.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!