NagaCorp CEO amends bonds conversion plan

Jun 26, 2017 Newsdesk Latest News, Rest of Asia, Top of the deck  

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Chen Lip Keong, chief executive of casino operator NagaCorp Ltd, will seek the concurrent conversion of the bonds of the TSCLK Complex and the NagaCity Walk, according to a filing to the Hong Kong Stock Exchange on Friday after trading hours.

NagaCorp is the operator of NagaWorld, the only casino licensed for the Cambodian capital Phnom Penh.

NagaCorp said it received the revised notice of intention from Mr Chen on Friday. The CEO’s previous plan was to convert in full the bonds of TSCLK Complex to the shares of NagaCorp, which would increase the percentage of NagaCorp share he holds from 38.98 percent to 61.13 percent. With the subsequent conversion of the NagaCity Walk bonds, Mr Chen’s stake in the company would eventually increase to 69.83 percent.

Following the revision announced on Friday, Mr Chen will now seek to convert in full and concurrently both the bonds of TSCLK Complex and NagaCity Walk. If the proposal is approved by shareholders, Mr Chen’s stake in NagaCorp will increase to 65.42 percent.

Brokerage Union Gaming Securities Asia Ltd said in a note on Saturday that a concurrent conversion instead of a staggered conversion would have a “significant positive effect on valuation of nearly one full multiple turn on 2018 EBITDA [earnings before interest, taxation, depreciation and amortisation]“. “Under a concurrent conversion, shares are trading at just 4.2 times 2018 EV/EBITDA,” said analyst Grant Govertsen.

He added: “The announcement of a concurrent conversion removes the single largest overhang on shares of NagaCorp and we therefore expect shares to rebound sharply in the near-term.”

While a whitewash waiver is still needed for Mr Chen not to be required to make a mandatory general offer for all of the issued shares he does not own, Union Gaming’s Mr Govertsen said the concurrent conversion of the bonds makes it “significantly more likely that the whitewash waiver will be approved” by shareholders. The matter is to be voted at the firm’s extraordinary general meeting on July 21.

The development of both the TSCLK Complex – also known as Naga2 – and NagaCity Walk were funded by Mr Chen in return for convertible bonds with the value of US$275 million and US$94 million, respectively.

Naga2, a hotel and gaming extension of NagaWorld, is expected to open during 2017. The complex is connected to NagaWorld through the shopping complex NagaCity Walk, which was completed and acquired by NagaCorp in May 2016.

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