Asia Entertainment & Resources has rapidly emerged as a premier organizer/promoter of VIP gaming, primarily in what is arguably the Las Vegas of South China, Macau. Macau has a relatively small population of just 540k but is only 37 miles across the Zhujiang River Estuary from Hong Kong and plays host to massive liquidity in the Chinese economy, making it a booming casino city.
The growing wealth, income gap, and relaxed monetary policies of modern China are priming the pump for explosive growth of the Casino/Gaming sector in Macau, and AERL is ideally positioned to profit from this growth. Investors are taking note of the potential AERL has as a leading promoter of VIP gaming, with solid ties to key locations in Macao's hottest venues, like the Galaxy Star World Casino in downtown Macau (12 tables), in addition to the Venetian Macao-Resort-Hotel (5 tables) and Galaxy Cotai (12 tables), both on the famous Cotai Strip.
The Cotai Strip is like the Las Vegas Strip and is the epicenter of tourism and gaming activity in Macau. A main reason for the company's success has been to know where the action is and how to secure marketing/agreements. With 20-year veteran gaming industry management at the helm, AERL has been able to amass an impressive portfolio of over 1,600 agents/collaborators across Asia, crystallizing renewable agreements, yet achieving a very flexible, extensible framework for the business model.
Huge leeway to move to and add new casino locations, combined with a solid performance record, is generating substantial buzz for AERL. Top investment banking, securities, and investment management firm Maxim Group recently initiated coverage on AERL with a Buy rating and $12 price target, joining the list of other current Buy rating analysts at Janney Montgomery Scott, Sterne Agee, and Stifel Nicolaus.
A closer look at the annual audit and financial filings for fiscal 2011 confirm this solid outlook, with AERL reporting a 97% increase in revenues for the year over 2010 figures, with the two primary factors being a 91% jump in rolling chip turnover, and a 99% increase in adjusted net income (non-GAAP). Guidance offered indicates rolling chip turnover of $24.96B and adjusted net income (non-GAAP) in the $88-95M neighborhood for 2012.
That's a very nice neighborhood to be in and the markets have taken note of the cherry fundamentals and obvious underlying dynamics, eyeing AERL as a perfect way to catch some of the heat from China's overflowing economic cauldron.
The AERL Board approved a $0.10 per share semi-annual dividend after six-month financials were reported recently, subsequently also approving a 20% raise to $0.12, beginning with the first six-month dividend for 2012. Naturally, as this total dividend is some 15% of EBITDA, increased cash flows year-over-year will drive the figure higher, a likely possibility given the nature of the operations and AERL's performance vectors.
Asia Entertainment & Resources is generating serious profitability and offers the kind of real discount profile that has investors buzzing (2.8x for 2012 P/E ratio). Maxim Group's endorsement pegs the fundamentals as having a great future, and it is easy to see why the future of the gaming sector in Macau will continue to grow on the heels of burgeoning Chinese capitalism.
For more information on Asia Entertainment & Resources Ltd., please visit the company's investor relations website at: www.ir.aerlf.com
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