Despite improving its financial outlook, Cambodian gaming operator NagaCorp is not expected to return to pre-COVID levels of gaming operations, rating agency S&P Global Ratings indicates in a recent dispatch.
According to the agency, the leading gaming operator in Cambodia has notably improved its liquidity position thanks to a significant reduction in refinancing risk following a repayment of outstanding senior unsecured notes in July of this year.
NagaCorp also managed its cash flows prudently since 2022, prioritizing debt repayment and limiting cash dividends and capital expenditures (capex).
‘Over the past four years, NagaCorp has scaled back its annual capex to less than $165 million and has not issued cash dividends since 2021. A recent $70 million shareholder loan further bolstered its liquidity, leaving the company with an estimated $80 million in cash post-repayment’, S&P Global Ratings analysts say
However, despite the improved outlook, NagaCorp’s gaming operations are not expected to return to pre-COVID levels, mainly due to the absence of Chinese junket operators, who once contributed significantly to the company’s gross gaming revenue.
In 2019, NagaCorp’s reported revenue and EBITDA were $1.8 billion and $667 million, respectively.
However, S&P Global Ratings noted that by 2023, these figures had dropped to $533 million in revenue and $292 million in EBITDA, representing 30 and 44 percent of 2019 levels.
Meanwhile, projections for 2025 estimate revenue and EBITDA to reach only 38-42 percent and 53-57 percent of pre-COVID levels, respectively.
The brokerage acknowledged NagaCorp’s strategic focus on strengthening its balance sheet and managing funding requirements appropriately, after the company’s decision to extend the completion date for its significant Naga3 expansion project by four years to September 2029.
‘Originally announced in 2019 with a budget of $3.5 billion, the project was initially supported by the lucrative Chinese junket business, which has since been eliminated’, the agency added.
S&P Global Ratings expressed confidence that NagaCorp would continue to manage its capital structure conservatively, potentially reducing investment in Naga 3 if necessary and maintaining a cautious approach to dividends. This strategy aims to ensure that NagaCorp’s credit profile remains aligned with a ‘B’ rating.
The stable outlook reflects S&P Global Ratings’ expectation that NagaCorp will continue to demonstrate improving operational performance and maintain its strong position in the Cambodia gaming market.
However, the rating could be lowered if the company’s operations weaken, if it pursues aggressive debt-funded growth, or if shareholder returns result in a rapid increase in debt levels.
