Fitch Ratings assigned Universal Entertainment Corporation a “Long-Term Foreign-Currency Issuer Default Rating of ‘B+’ with a Stable Outlook” after providing a modestly optimistic assessment of the firm, especially its Okada Manila IR in the Philippines.
Fitch noted, “The ratings reflect Universal Entertainment’s strong market position both in the casino business as the operator of the Okada Manila, the largest integrated casino resort (IR) in Manila’s Entertainment City, and in its Japanese pachinko and pachislot business where Universal Entertainment commands a leading market share.”
In regard to Okada Manila, Fitch found that it “has good potential to establish itself as a leading IR in Entertainment City thanks to its scale and high-end focus. The ramp-up is well under way and Universal Entertainment expects to complete the construction in 2019Q3. Project risk is limited, even after accounting for potential delays and cost overruns, as most of the investment has been completed.”
However, Fitch sees risks in the company’s lack of a track record in attracting VIP customers, uncertainty about the regulatory policies of the Philippine government, and most of all its dependence on a single casino location.
More challenges are expected within Japan, where “the domestic pachinko and pachislot market is in a structural decline.” However, “Universal Entertainment’s competitive technology and leading market share should help the segment to recover and achieve stable, albeit low, growth and exhibit steady profitability, supported by replacement demand.”
Fitch also observes, “A further constraint is Universal Entertainment’s corporate governance amid the ongoing dispute with its founder and former Chairman Kazuo Okada.”