The lingering absence of Chinese high rollers is hurting Asia-Pacific (Apac) casino jurisdictions beyond Macau, says a report from S&P Global Ratings Inc, mentioning Cambodia as an example.
Cambodia’s tourism sector has “substantially recovered”, to about 84 percent of pre-Covid volume, yet the gross gaming revenue (GGR) of its casino industry “lags that of regional peers,” said the paper by some of the institution’s analysts.
“In short, the pool of high rollers has shrunk,” stated S&P Global, referring in particular to NagaCorp Ltd, a Hong Kong-listed firm that has a long-life monopoly on casino operations in the Cambodian capital Phnom Penh, via the company’s NagaWorld complex.
“Between 2017 and 2019, 70 percent of Naga’s GGR comprised VIPs. With the removal of Chinese junkets, we now expect VIPs (referrals) to contribute less than 10 percent of Naga’s total GGR,” wrote S&P Global.
The institution added: “We believe it will take more than three to four years for Naga’s operations to return to pre-pandemic levels.”
Though it also noted, referring to enlargement of the NagaWorld complex: “We expect the company to be flexible and potentially amend its pending US$3.5 billion Naga 3 expansion plans, given the changed landscape of gaming markets.”
NagaCorp had already announced plans to extend the construction period by four years to September 2029.
“For the time being, we anticipate the company will seek to imitate Las Vegas and Singapore by seeking to capture a greater share of the mass market by promoting non-gaming attractions,” stated S&P Global.
NagaCorp’s rating was on “CreditWatch with negative implications due to a rising refinancing risk of US$472 million senior unsecured notes, maturing in July 2024,” said the ratings agency.
“Despite ongoing operational recovery, we believe any operational missteps may result in an inadequate cash accumulation to meet the maturity,” added S&P Global.
Though it noted the firm was working with the major shareholder, Chen Lip Keong, “to agree on a loan to provide additional buffer to Naga’s liquidity”.
The institution stated: “We believe the outcome of its refinancing efforts will drive the credit rating on Naga for the rest of the year.”
Morgan Stanley Asia Ltd stated in July that it expected NagaCorp to be “able to refinance” its bond issue.
S&P Global said in its Apac update, that in the Malaysia market, GGR had shown “steady recovery”, driven by Genting Malaysia Bhd, the country’s casino monopoly operator with its Resorts World Genting complex.
There, S&P Global expects “a full recovery” by 2024. “As of the second quarter of 2023, the company’s GGR, which is an S&P Global estimate, reached about 80 percent of pre-pandemic levels, thanks to an increase in tourist numbers from Singapore and China,” stated the institution.
For Malaysia-listed entities Genting Malaysia and its parent Genting Bhd, the ratings house anticipates “credit quality to notably improve by 2024, as planned investments remain contained, relative to its cash flows generating abilities”.
It added: “During the pandemic Genting Malaysia completed key investments, including a theme park; it has no other major investments in the pipeline.”
S&P Global expects Genting Malaysia to exceed an upgrade trigger of “30 percent funds from operations to debt” in 2024-2025.
Though it said there was “lingering event risk” via the Genting group’s United States subsidiary, Genting New York LLC, which is bidding for a full casino licence in downstate New York.
“If awarded, the licence and investments could cost at least US$1 billion. Our current base case implies about US$1.5 billion buffer to the current rating on Genting Bhd, while Genting Malaysia is seeking to attract buyers for four parcels of land in Miami.
An earlier proposed deal on the Miami land did not go forward.
Regarding the Macau market, S&P Global said it expected mass-market GGR to “fully recover in 2024”.
“However, we expect VIP GGR to lag, following tighter rules on junkets contained in changes to gaming laws. As a result, we do not expect Macau’s total GGR to return to pre-pandemic levels at least over the next one to two years,” stated the institution.
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