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Asia Entertainment & Resources Ltd. (“AERL” or the “Company”) (NASDAQ: AERL), which operates through its subsidiaries and related promoter companies as a VIP room gaming promoter, today announced it will implement a new program for large VIP agents who do not require credit from AERL (“non-credit agents”), effective September 1.
As mentioned in an earlier release, the Company has recently tightened its credit policies due to the slowdown in the economy in China, which has slowed year-over-year growth of AERL’s Rolling Chip Turnover. As an incentive to attract more non-credit agents, the Company will, beginning September 1, provide an option for these non-credit large agents to share the win/loss under the revenue sharing model based on their proportionate contribution of total Rolling Chip Turnover.
With this new program, AERL expects to reignite growth in Rolling Chip Turnover by attracting non-credit agents to bring more patrons into the Company’s VIP rooms, which would not result in any additional credit risk to AERL. The increase in Rolling Chip Turnover should result in higher monthly revenue from the casino operators and ultimately allow AERL to negotiate for a higher interest-free line of credit from the casino operators. In addition, this may enable the Company to negotiate a higher revenue sharing percentage on the revenue sharing model and would provide the opportunity for AERL to receive invitations to open future VIP rooms at other casinos on favorable terms. Furthermore, the increase in Rolling Chip Turnover will help mitigate the volatility of the revenue sharing model. When the economy improves, the Company can consider extending credit to these non-credit agents, which will help to further expand the Company’s agent network.
”This incremental non-credit business will have lower margins than our existing credit business, but we believe the new program will ultimately be responsible for an increase in our net income,” said AERL Chairman Lam. “As well as providing long-term value for our shareholders, we believe the program will give these agents a sense of loyalty and belonging to our Company.”