Iao Kun Group Holding Co Ltd fka IKGH

[Shengli]

Excellent recap from YMB

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_A/threadview?m=tm&bn=85843&tid=79&mid=79&tof=2&frt=2



The author has an agressive target - hope he is right. Based on other gaming companies and how hot Macau is - this valuation at $22 may prove right on.

I agree with the author of the posting. With regard to one of the authors points on the oversight at the company's gaming rooms I would add the following points:

1. Macau gets 70% of its tax revenue from gaming and 70% of this from VIP gaming - therefore, they have someone review the gaming room take daily.

2. The Casino is involved in running the room and in verifying the daily winnings in the room as well. So for each room - AERL management, the Casino, and tax authorities sign-off each day on the daily winnings to verify the winnings and taxes to be paid.

These daily checks and monthly settlements with the Casinos add a level of certainty in knowing the numbers are real - no small comfort in the rough and tumble world of investing in the fastest growing economy in the world.

AERL is expected to earn about $38 million (per guidance) in 2010 and based on the recent acquisition may earn $55 million in 2011. Importantly, operating cash flows should be almost equal to net income as the company does not have accounts receivable or inventory. Investments in the business are necessary in the form of cash invested into the "cage" (basically in the gaming room) to drive additional gambling volumes.

With the warrant receipts expected to be over $25 million (per the author) and no more overhang (all warrants gone as of October 28th) - this stock should be ready to run.

Exposure to Macau without the massive cap-ex, debt, and other issues with the large Casinos. A Macau pure-play with diversification operating at three Casinos. Just needs some exposure now after graduating through a significant milestone last week.