NagaCorp releases details on US$3.8 billion Naga 3 project

Hong Kong-listed Nagacorp on Thursday released details of its much anticipated Naga 3 project to its shareholders on the Hong Kong Stock Exchange.

According to a filing, the Naga 3 Project is set to deliver greater gaming and non-gaming spaces, comprising of amenities and facilities not available at Naga 1 and 2, including high-tech virtual reality interactive indoor theme parks, more shopping, and MICE facilities and family recreational areas.

The project will also consist of five distinct hotel towers, with some managed by well-known international hotel brands.

In its gaming space, the property feature NagaCorp’s “Casino Cell Concept” – large casino spaces are broken down into smaller spaces, each with its own entertainment, food and beverage and other integrated services.

The project is expected to incur approximately US$3.8 billion to US$4.0 billion in capital expenditure for its development.

However, the company said it has not yet ascertained the total development costs, or how it will be funding the development cost of the project. Some options at the moment include internally generated free cash flow from the Company, funding about 50 percent of the total development costs, and other funding methods.

However, Morgan Stanely analysts warned that Phase 3’s ambitions for more than 4,000 keys and huge capital expenditure may be a bit too ambitious.

“Yet, the funding gap remains. The company plans either a debt offering (high-interest
expense) or to get funding from the chairman (meaning future equity
dilution),” said the analysts.

The company’s announcement comes as it released its financial results for the first three months of 2019.

According to the filing, gross gaming revenue grew 32 percent year-on-year, reaching $321.2 million for the three months ended March 31, 2019.

NagaCorp said the increased gaming revenue came as a result of continued political stability, tourism growth, Naga 2’s contribution, VIP business growth, Naga 1’s upgrade, and “financial soundness.”

The number, however, came in weaker than Morgan Stanely analyst expectations of $409 million. MS said that both VIP rolling chip volume and mass were weaker sequentially, owing to seasonality.