GGRAsia – Moody’s says NagaCorp dominant despite earnings squeeze

Moody’s says NagaCorp dominant despite earnings squeeze

Oct 17, 2022 Newsdesk Latest News, Rest of Asia, Top of the deck

Moody’s Investors Service Inc said on Friday that despite its downgrading two days earlier of Cambodian casino operator NagaCorp Ltd, the institution acknowledged the Hong Kong-listed business had a “dominant position” in the country’s capital Phnom Penh, where it enjoys a long-life monopoly.

There, its NagaWorld operation (pictured in a file photo) enjoyed “low labour costs and gaming tax rates” that had “supported a favourable cost structure”.

The downgrade had been to ‘B2′ from ‘B1′, according to an October 12 memo. Both ratings are considered non-investment grade.

In its Friday update, Moody’s noted that the institution had an “expectation of a gradual recovery in NagaCorp’s operating performance in 2022 and 2023, but earnings will remain well below” 2019 levels.

Moody’s added that NagaCorp’s rating was “constrained by its single-site operations, and exposure to political risk and the evolving regulatory framework in Cambodia.”

In a Friday filing to the Hong Kong bourse, after trading hours, NagaCorp said it had on October 12, via the open market, repurchased a portion of its senior notes due in 2024, representing US$3.0-million – i.e., 0.55 percent – of the principal.

That exercise, combined with six others – spread across August, September and earlier in October – of portions of the 2024 senior notes, meant NagaCorp had so far repurchased approximately 1.51 percent of the aggregate principal amount of the notes, or just below US$8.31 million.

“The board expects to cancel such repurchased 2024 senior notes, which will thereafter cease to be outstanding,” NagaCorp reiterated in its Friday filing.

Moody’s for its part reiterated in its Friday update, that it expected NagaCorp “will likely require external financing to repay” its outstanding bond maturing in July 2024.

NagaCorp’s EBITDA for the first nine months this year were US$183.2 million, versus negative EBITDA of US$17.4 million for the prior-year period, the company announced earlier this month.