KUALA LUMPUR: Luster Industries Bhd, which announced last Friday that it was venturing into the Cambodian gaming and lottery market, plans to first expand its lottery outlets in Phnom Penh in the first year before looking at other provinces there.

“We are [also] looking at the borders between Cambodia and Thailand, Cambodia and Vietnam, and the tourism belt along the beaches of Cambodia to set up a casino and online casino,” Luster managing director Lim See Chea said in a statement yesterday.

“In the next few weeks, we would be evaluating a few gaming and entertainment groups based in the region to form a strategic partnership. Once finalised, we will announce the new partnership and our group’s expansion plans into various gaming aspects,” he said.

The high precision plastic parts maker is allocating some RM100 million as capital expenditure to expand its presence in the Cambodian gaming industry for the next three years.

It plans to raise the money either via the capital market, and/or through bank borrowings and/or internal funds.

Last Friday, Luster signed a share sale agreement with Opal Deluxe Ltd to acquire 600 shares for US$4.2 million (RM15.15 million) cash, for a 60% stake in Pan Cambodian Lottery Corp Ltd (PCLCL) — a licensed number forecast operator in Cambodia.

“There is a profit guarantee which the vendor gives to Luster for the purchase, which is an aggregate of US$3 million over a period of three years, of which US$500,000 is for the financial year ending Dec 31, 2015 (FY15), US$1 million for FY16 and US$1.5 million for FY17,” said Liang.

PCLCL was incorporated in 2011 and had received its gaming licences from the Cambodian government, and operates the 4D, 5D and 6D games. The company has draws  on Monday, Wednesday and Friday.

“With the new partnership formed with PCLCL, we target to achieve 2,000 mobile agents and outlets within the next five years nationwide,” said Lim.

He added that there are about five players in the Cambodian gaming industry with similar licences, with the biggest being Hong Kong-listed NagaCorp Ltd.

Luster is optimistic about the future gaming market trend in Cambodia.

Its deputy managing director Liang Wooi Gee said, “The Cambodian government has been very supportive of the gaming and lottery industry by imposing a low tax rate on the industry and reasonable prize payout rate, the country’s gross domestic product per capita based on purchasing power parity has increased from US$2,300 in 2011 to US$2,600 in 2013, and we believe this will keep increasing at a faster pace in coming years.”

He added that Cambodia has a low tax rate and the lottery company only needs to pay 10% tax on sales and need not pay corporate gain tax.

“It also has reasonable payout rate as the prize payout under the regulations is 50%, which is much lower than 64% in Malaysia, the use of an advanced lottery system has the risk reduced considerably,” said Liang, adding that the country also offers low set-up and operation costs.

This article first appeared in The Edge Financial Daily, on May 6, 2015.