GGRAsia – NagaCorp 2024 revenue might grow 17pct y-o-y: Moody’s

NagaCorp 2024 revenue might grow 17pct y-o-y: Moody’s

Apr 11, 2024 Newsdesk Latest News, Rest of Asia, Top of the deck

The 2024 revenue for Hong Kong-listed Cambodian casino operator NagaCorp Ltd is likely to grow by 16.5 percent year-on-year, says Moody’s Investors Service Inc.

The ratings agency thinks such GGR will be US$621 million, versus US$533 million in 2023.

But the casino firm’s margin on earnings before interest, taxation, depreciation and amortisation (EBITDA) is forecast to contract by 2 percentage points, to 35 percent, added Moody’s in a Tuesday note. It cites Moody’s Financial Metrics and its own estimates.

The institution expects 2024 EBITDA to expand by 8.5 percent year-on-year, to around US$320 million, from US$295 million last year.

Moody’s anticipates NagaCorp’s 2024 debt-to-EBITDA ratio to decline to 0.4x, from 1.8x in 2023.

NagaCorp has a long-life casino monopoly in the Cambodian capital Phnom Penh, where it runs the NagaWorld complex (pictured).

Moody’s stated that NagaCorp’s ‘B3’ corporate family rating “incorporates refinancing risk, as the company has a sizable U.S. dollar bond coming due in July 2024″.

The ratings agency added: “NagaCorp obtained a shareholder loan and took steps to preserve liquidity by reducing discretionary spending. However, a slowdown in earnings recovery could strain its liquidity.”

NagaCorp said earlier this month that it intended “to drawdown the loan extended by the controlling shareholder of the company of up to US$80 million … so as to discharge part of the outstanding 7.95-percent senior notes issued by the company of US$472.2 million, upon their maturity on 6 July 2024″.

Moody’s said in its latest credit opinion on the casino group that the B3 rating reflected the “dominant” market position of NagaWorld, supported by Cambodia’s “low labour costs and gaming tax rates,” which also supported a “favourable cost structure”.

Though the institution observed: “The rating is constrained by NagaCorp’s single-site operations, and its exposure to political risks and the evolving regulatory framework in Cambodia.”

In a voluntary filing in early April, the casino group stated that first-quarter gross gaming revenue (GGR) rose 23.7 percent year-on-year, to nearly US$145.4 million.

The firm reported EBITDA of US$80.3 million for the three months to March 31, up 32.6 percent from the prior-year period, but “largely unchanged from the last quarter,” observed Moody’s.

NagaCorp’s management did mention however in February that it was looking to reduce the scale and budget of its Naga 3 extension project at NagaWorld, in order to minimise capital expenditure, “so that there is surplus cash flow, possibly for the payment of dividends”.

Moody’s said in its latest assessment: “NagaCorp has taken steps to preserve liquidity by paying scrip dividends in lieu of cash and reducing development spending associated with its expansion project, Naga 3.”

The ratings agency added: “We expect the company to spend just US$15 million on Naga 3 in the first six months of 2024.

“Management is also reviewing the project, which may result in a reduction in the original project size and development cost of US$3.5 billion.”

In the February briefing, NagaCorp had stated Cambodia was likely to receive more visitors from mainland China this year as post-pandemic direct-flight capacity grew, which might aid recovery of GGR for that nation’s casino industry in general.

Moody’s stated in its Tuesday update: “International tourist arrivals to Cambodia in the first two months of 2024 were 79 percent of 2019 levels, however, tourist arrivals from China were only 26 percent of 2019 levels.”