The impairment loss on NagaCorp Ltd’s suspended Vladivostok casino resort scheme in Russia and the company’s post-pandemic recovery pace so far in its Cambodia operation, has led a brokerage to cut 2024 and 2025 estimates for the group’s earnings before interest, taxation, depreciation and amortisation (EBITDA).
“We lower our 2024 and 2025 EBITDA forecasts by 37 percent and 5 percent to US$249 million and US$436 million,” said China International Capital Corp (CICC) Hong Kong Securities Ltd in a Monday memo.
That was “given the impairment loss of the Vladivostok project, and that we believe the recovery of Naga[World] could need more time,” stated analysts Shengyong Goh, Jiayu Wang, and Liwei Hou.
They were referring latterly to the company’s gaming complex (pictured) in the Cambodian capital Phnom Penh, which operates a casino monopoly there running to the year 2045.
Hong Kong-listed NagaCorp released its interim results on August 27. The following day, management outlined its strategy for capturing more mass-market gambling custom, as the travel and gaming sectors in Southeast Asia recalibrated operations in the post-pandemic recovery period.
As of June this year – despite Cambodia seeing total visitor arrivals surpassing 2019 levels – visitors to that country from China only recovered to 34 percent of the 2019 level, CICC mentioned, citing official statistics.
But the brokerage suggested NagaCorp might see its mass business segment boosted in the near future, when a new airport in Phnom Penh – the Techo Takhmao International Airport – starts operating, in likelihood by February 2025.
It added that fresh foreign direct investment (FDI) to Cambodia, could bring fresh clients to NagaWorld’s casino operations.
CICC stated: “According to Cambodia Investment Board, [for the] first half of 2024 total FDI almost doubled to [reach] the first half of 2023-level, [and] China remains the largest contributor,” with 42.6 percent of such investment.
The institution added that “FDI from South Korea as well as Vietnam and other ASEAN countries”, could bring “travellers and expats with relatively high spending power to Cambodia’s gaming market”.
It further noted NagaCorp was also pursuing that segment of “high-end customers, to drive the business volumes”.
In other commentary, CICC observed there had been a “removal” of a “refinancing overhang” for NagaCorp.
“In July 2024, the company fully paid down its debt of US$472.2 million upon maturity, which we think could alleviate the market concerns on its equity financing movement,” stated the analysts.
CICC also noted: “Management expects to prioritise its future generated cash flows for the Naga 3 construction programme, after which the company will further consider resuming its cash dividend.”
Naga 3 is an extension scheme for the existing NagaWorld casino resort complex. NagaCorp’s management had, in February this year, flagged the possibility of reducing the scale and budget for the Naga 3 project.
At last week’s media briefing, the firm did not give futher commentary on Naga 3. In its earnings announcement, NagaCorp said preparatory work was ongoing.
