S&P Global Ratings has assigned a ‘B’ rating to NagaCorp, the Cambodian gaming operator, with a stable outlook for 2024. This assessment reflects the company’s strategic financial maneuvers and ongoing operational adjustments in a post-pandemic environment.
Financial Management and Liquidity
NagaCorp has made significant strides in reducing its refinancing risk, particularly evident after repaying its outstanding senior unsecured notes in July 2024. Since 2022, the company has meticulously managed its cash flow by limiting cash dividends and curbing capital expenditure (capex) to less than $165 million over the past four years. This disciplined financial strategy has bolstered NagaCorp’s liquidity, further supported by a $70 million shareholder loan.
In addition to these measures, NagaCorp has extended the completion date of its Naga3 project by four years to September 2029. Following the notes repayment, S&P Global estimates that the company will maintain a cash balance of approximately $80 million, indicating a strong liquidity position moving forward.
Operational Challenges
Despite these financial improvements, NagaCorp’s gaming operations are unlikely to return to pre-COVID-19 levels in the near future. The elimination of Chinese junket operators, which previously contributed 70% of the company’s gross gaming revenue (GGR) in 2019, has significantly impacted its revenue streams. In 2019, NagaCorp reported revenue of $1.8 billion and EBITDA of $667 million. By contrast, the company’s 2023 reported revenue and EBITDA stood at $533 million and $292 million, respectively, marking a substantial decline of 30% and 44% compared to 2019 figures.
S&P Global’s projections indicate that NagaCorp’s reported revenue and EBITDA in 2025 will be between 38% – 42% and 53% – 57% of pre-COVID numbers, respectively. This outlook underscores the challenges the company faces in regaining its former market position amidst changing regulatory landscapes and market dynamics.
Future Outlook and Developments
NagaCorp’s strategic focus on financial prudence and liquidity management has positioned it to navigate the post-pandemic recovery phase effectively. The company’s extension of the Naga3 project timeline and the infusion of shareholder loans are indicative of a cautious yet forward-looking approach to growth and development.
However, the broader market recovery remains uncertain, particularly with the diminished role of junket operators who were instrumental in driving high-volume play from Chinese tourists. The shift in market dynamics necessitates a recalibrated strategy that might include diversifying revenue streams and enhancing non-gaming amenities to attract a broader customer base.
Recent Corporate Changes
In May 2024, NagaCorp announced the resignation of its Finance and Treasury CEO, a move that could signal further internal restructuring and strategic realignments. This change in leadership might also reflect the company’s ongoing efforts to adapt to the evolving business environment and regulatory requirements.
Conclusion
While NagaCorp faces significant challenges in restoring its pre-pandemic revenue levels, S&P Global’s ‘B’ rating with a stable outlook for 2024 reflects confidence in the company’s current financial management and strategic initiatives. The company’s focus on liquidity, controlled expenditure, and extended project timelines are prudent measures that could help mitigate some of the operational challenges it faces.
NagaCorp’s ability to adapt its business model and explore new market opportunities will be crucial in determining its long-term success and stability. As the global gaming industry continues to recover, NagaCorp’s strategic decisions in the coming years will be pivotal in shaping its future trajectory.
David Garato is a luminary in gaming journalism, renowned for peeling back the curtain on the gaming world with his witty and insightful commentary. A decade into weaving stories from the pixelated edges of indie games to the expansive universes of AAA titles, David’s work is a thrilling blend of analysis and adventure. When not writing, he’s live-streaming, sharing his gaming exploits with an engaged and growing audience. David doesn’t just write about games; he lives them, making him a trusted guide in the gaming community.