New bond offering will help NagaCorp in long run: MS

Cambodia’s NagaCorp is set to become a key beneficiary of booming Chinese outbound tourism, and its recent note issue will support future growth, say Morgan Stanley analysts.

Last week, NagaCorp announced it has raised $290 million net through a senior note issue to promote growth in its VIP business and to upgrade facilities at Naga 1.

“The new route to access capital (hitherto not available to NagaCorp) will support future growth regionally and locally,” said Morgan Stanley.

However, high interest rates on the bonds of 9.375 percent could mean annual interest expense of US$28 million, which was 11 percent of profit in 2017.

The brokerage added that the use of proceeds will not drive their 2018/19 EBITDA estimates in the near term (currently 39 and 22 percent).

The brokerage has reduced its VIP estimates due to the delay in the start of Macau junket Megstar to 18Q3 (from 18Q2), but has raised mass revenue forecasts due to strong Chinese visitation growth.