GGRAsia – Outlook solid on mulled Okada Manila Spac IPO: analysis

Outlook solid on mulled Okada Manila Spac IPO: analysis

Feb 19, 2021 Newsdesk Japan, Latest News, Philippines, Top of the deck

Universal Entertainment Corp’s idea for a stock-market listing in the United States of its Philippine casino resort, Okada Manila, via a special-purpose acquisition company (Spac), could be an “attractive offer to investors”, said Howard Klein in Thursday commentary.

The opinion was lodged with Singapore-based Smartkarma Innovations Pte Ltd. The latter is described as an “independent investment research network”.

In a February 12 announcement, Japan’s Universal Entertainment said it would be “formally examining” a listing for its Manila casino resort operating company, on either the Nasdaq or the New York Stock Exchange, via the Spac route. The aim was to raise money for “further expansion” of the Manila casino resort business, and to achieve “greater corporate group value”.

The Japanese entertainment conglomerate has also noted that it aimed to list the casino resort business “some time in fiscal[-year] 2021”.

“Given the recent track record of Spac IPOs [initial public offerings] rocketing market caps soon after IPO issuance, the move by Universal will present an attractive offer to investors,” Mr Klein wrote in his Thursday commentary.

“The sponsor is Universal [Entertainment]… the business a firmly-established licensed casino operator in a robust market coming out of a [Covid-19] pandemic-induced torpor. The prospects for a successful launch of Okada Manila as a public traded Nasdaq company are solid,” Mr Klein remarked.

Risk associated with such an exercise was “low”, the industry observer wrote. “Okada Manila is a well-established, fully financed player with a genuine moat in the Manila gaming market it shares with only three other properties in the city’s Entertainment Zone.”

For the fiscal year 2020, the Universal Entertainment parent saw its net loss reach JPY19.22 billion (US$181.8 million), a widening from the group net loss of JPY5.19 billion in the previous fiscal year. The Okada Manila unit had a JPY9.03-billion loss for 2020.

Universal Entertainment said it had made “major cost” cuts at Okada Manila during the reporting period, including in personnel expense.

The Japanese group said it expected “many of the expense reductions” achieved in fiscal year 2020 would be retained for Okada Manila once business improves after the initial shock of the Covid-19 pandemic. That would in likelihood mean an improvement in Okada Manila’s margins.