Citi Research, the strategy and analysis arm of Citigroup Inc, one of the world’s largest financial firms, has questioned NagaCorp’s VIP junket program in a recent report that also cites cross-border competition and tourism failings as potential threats to the program’s success.

Citi Research’s analysis was published on NagaCorp’s website on April 8 in response to the casino firm’s unaudited first-quarter results, which show a 14 per cent increase in VIP gambling during the first three months of the year.

“Failure to attract tourists to Phnom Penh could cut traffic at the casino and lower gaming revenue. Another downside risk is the perceived ‘weak’ control environment in Cambodia, giving rise to money laundering concerns,” the eight-page report says, adding that NagaCorp’s unaudited VIP results were below estimates.

Citi Research cautioned the company against investing in non-gambling ventures and said competition from Chinese gaming hub Macau, would also have a strong negative impact on NagaCorp’s junket program, as would the rise of any large-scale casino industry in Thailand or Vietnam.

“A sustained slowdown in Macau gaming would also threaten Naga’s strategy of targeting the ‘Poor Man’s VIP’ as Macau junkets would be forced to act more competitively with regards to all segments of the VIP market,” the report states.

The analysis of NagaCorp’s VIP junket scheme, which was launched in March 2013 and earned the firm more than $133.1 million last year, was partly backed by fellow multinational financial services corporation Morgan Stanley.

In a report also published on NagaCorp’s website on April 8, Morgan Stanley states that the gambling operator’s first-quarter VIP spending and junket figures were weaker than expected and that increasing competition from other ASEAN gaming markets especially the Philippines – could pose a certain degree of competition.

NagaCorp, owner of Phnom Penh’s only casino, NagaWorld, reported a 16 per cent increase in revenue for the first quarter of 2014, according to the latest unaudited financial statement.

Gamblers played more than $115 million on public gaming floor tables during the first three months of the year, up 24 per cent on 2013 figures. Electronic gambling machine players, meanwhile, spent $273 million, up 10 per cent.

NagaCorp reported profits of more than $140 million in 2013, according to their February 12 annual financial statement, which also detailed the firm’s plan to introduce regular chartered flights between Macau and Phnom Penh in an effort to bolster the VIP market.

“To cope with the expected increase in VIP headcount, the Group is completing level three of the hotel block and the rooftop of the pool wing to create additional VIP junket gaming areas that will potentially add up to 63 VIP gaming tables, which is targeted for completion in 2014,” the statement said.

A $369 million second Phnom Penh casino named Naga2 and a $350 million casino project in Russia were also outlined in the annual financial statement.

NagaWorld could not be contacted for comment.