Brokerage Morgan Stanley Asia Ltd said casino developer and operator Nagakov Inc is "highly likely" to have to refinance its 2024 bonds given the expected pace of recovery in the Cambodian gaming market.
Hong Kong-listed Nagakov holds a long-lived exclusive casino license in Phnom Penh, the Cambodian capital that runs the Nagaworld resort complex.
The casino company earlier this month reported full-year 2022 earnings before interest, taxation, depreciation and amortization (EBITDA) of $245.4 million, compared to $15.6 million a year earlier. Nagakov's gaming gross revenue rose 99.5% year over year to $445.9 million.
Morgan Stanley analysts Gareth Leung and Praveen Chaudhary said in a recent note that Nagakov's recovery in the fourth quarter was nevertheless "quiet," suggesting that December's utilization rate "may have been much stronger."
While expected earnings from a package trip to China in the second quarter of 2023 will "help Nagakov's business recoveries," the brokerage said refinancing of bonds in 2024 "seems likely" given the agency's "recovery pace of base cases."
Morgan Stanley estimated Nagakov's 2023 net income of about US$884 million, with EBITDA of US$400 million.
In November, Nagakov launched a tender offer and repurchased approximately $69.5 million of the principal amount of the group's senior notes due in July 2024. The company said the tender at the time allowed the group to "manage the overall level of financing and reduce its total debt and interest expenses."
The casino company said it succeeded in lowering the outstanding principal amount of the 2024 note to about $472.2 million.
Nagakov's management said in its 2022 earnings report released this month that it had "already looked at a range of ways in which senior bonds can be repaid at maturity in 2024.
"Using internally generated operating cash flows to repay senior bonds for 2024 remains our top priority," it added
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