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Wednesday, March 04, 2009

Cambodian rule weighs on Dreamgate’s RM200m debt notes

Writen by Joe Chin


KUALA LUMPUR: RAM Ratings has placed the A1/P1 ratings of Dreamgate Corporation Berhad’s RM200 million Commercial Papers/Medium-Term Notes Programmes (2007/2014) on Rating Watch, with a negative oulook.

The rating agency said on March 4 the Rating Watch reflects RAM Ratings’ concerns about the adverse impact of the recent changes in Cambodia’s gambling regulations, which are expected to have negative implications on Dreamgate’s credit profile.

Most of Dreamgate’s profit-generating technical support and management Services (TSM) concessions are located in Cambodia (as of end-2008, some 79% of its concessions were positioned in that country.)

RAM Ratings said it understood that the Cambodian government has issued directives banning its citizens from gambling.

At the same time, slot operators have been asked to remove gaming machines from entertainment clubs by June 2009. This means that all slot machines can only be located in licensed casinos and hotels.

About 1,500 of Dreamgate’s slot machines (or 30% of its devices installed in Cambodia) are affected by the ruling.

On top of that, another 1,900 of Dreamgate’s slot machines in Cambodia have been affected by a more recent directive issued in February 2009.

Now, even slot machines in Cambodian hotels are required to temporarily cease operations, pending a full review of their licences and compliance with the earlier directive.

“We understand that the management plans to relocate the initially affected 1,500 machines to Macau, the Philippines and other casinos under the Group’s stable in Cambodia; the exercise is expected to be completed by mid-2009. On the other hand, the fate of the other 1,900 machines remains uncertain at this juncture,” it said.

RAM Ratings said Dreamgate might consider relocating these machines to Macau and the Philippines as well, if the licence review stretches more than two months.

In 4Q FY Dec 2008, Dreamgate incurred a pre-tax loss of RM9.48 million, due to various factors that include slowing TSM sales, write-off of expenses in relation to club closures and higher operating costs arising from additional outlets; before the regulatory changes, Dreamgate had added 12 new outlets in fiscal 2008.

Given these disruptions to its Cambodian operations, the Group’s performance in FY Dec 2009 is likely to come under severe pressure.

“RAM Ratings is concerned about Dreamgate’s position going forward. Given these rulings, we opine that the Group’s businesses in Cambodia are unlikely to yield the same returns as before.

While we note that Dreamgate will be moving these machines to new TSM concessions in Macau and the Philippines, its TSM presence in these countries is still relatively small,” says Kevin Lim, RAM Ratings’ Head of Consumer and Industrial Ratings.

RAM Ratings said it was monitoring the developments vis-à-vis Dreamgate, and keeping in close contact with the management in the lead-up to our annual review of its ratings.

The ratings will remain on Rating Watch until the review is completed; this is expected within the next three months.
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PM welcomes Cambodian planning minister

The planning and investment sectors of Vietnam and Cambodia should increase the exchange of visits and share experience to promote bilateral cooperation in trade and investment, said Prime Minister Nguyen Tan Dung.

While receiving Cambodian Minister of Planning Chhay Than in Hanoi on March 4, Mr Dung affirmed that Vietnam is willing to help Cambodia train its officials in planning.

Minister Chhay Than said that his ministry wants to learn from Vietnam’s development experience and expand cooperation with the Vietnamese Ministry of Planning and Investment, particularly in personnel training.

He thanked the Vietnamese people for their heart-felt support and valuable assistance to Cambodia during the past struggle for national liberation and the current process of national construction.

He conveyed top Cambodian leaders’ regards to Mr Dung and other Vietnamese Party and State leaders.

Earlier in the morning, Minister Chhay Than held talks with his Vietnamese counterpart Vo Hong Phuc and they signed a memorandum of understanding to increase bilateral cooperation in planning.
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Cambodia Arrests Suspected Pedophiles from US, France

By Daniel Schearf

Cambodian police have arrested an American and a French national on suspicion of molesting children. One organization that helped police catch the suspects worries that, despite increasing arrests, foreign pedophiles are still making Cambodia one of their prime destinations.

Cambodian authorities say the 64-year-old Frenchman was arrested after taking two Cambodian girls, aged 10 and 13, into his guesthouse room.

He was charged with "indecent acts" and could face up to three years in prison.

Separately, an American man charged with purchasing sex from two underage boys in northern Cambodia could be jailed for up to 15 years.

Samleang Seila is the Cambodia director for Action for Children, a French organization helping police to identify suspected pedophiles.

"That American man was under surveillance by our organization for more than one year," said Seila. "We heard that that American was coming to Cambodia for almost two years and he was moving from place to place in Cambodia to engage in sexual relations with separate boys."

Seila says, since 2003, his organization has helped rescue 185 sexually abused children in Cambodia, 80 percent of them young boys.

He credits international cooperation with agencies like the United States' Federal Bureau of Investigation for helping track down traveling sex offenders.

U.S. Embassy spokesman John Johnson confirmed to VOA the FBI did help with recent arrests.

"At the Cambodian government's request, the FBI is involved in a number of cases in the country, including the pedophile case, not just in the north but in several cities," said Johnson.

Cambodia is one of the poorest countries in Southeast Asia and has gained the unfortunate reputation of attracting child molesters looking to exploit children living in poverty.

Seila says he worries that, despite increasing cooperation and arrests, the number of pedophiles traveling to Cambodia may actually be on the rise.

"If you look at the number in 2008, there were about 15 arrests of foreign pedophiles in Cambodia. And, up to date this year, January to today, there are six pedophiles arrested in Cambodia already for abusing children," said Seila. "So, my anticipation is that there is still a concerning, increasing number of foreign sex offenders traveling to Cambodia to engage in sexual exploitation of children."

He says, in the past, Cambodian authorities lacked the resources, skills and political will to tackle the problem.

But he says, in the last few years, police have received better training, are taking child molesting seriously and hoping to improve Cambodia's image.
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