The ongoing closure of casino operations at its Cambodian integrated resort, NagaWorld, will likely see NagaCorp endure a weaker 2021 than in 2020, with revenue only reaching around 40% of 2019 levels according to Moody’s Investors Service.
The assessment formed part of a Tuesday note from the ratings agency in which it affirmed the “B1” corporate family rating of NagaCorp and “B1” senior unsecured rating of the company’s US$200 million bonds offering, with the outlook negative.
According to Moody’s Vice President and Senior Credit Officer Jacintha Poh, the additional notes “will provide the company with sufficient liquidity to fund its cash burn over the next 18 to 24 months should its casino operations remain suspended.”
However, “The negative outlook reflects our expectation that NagaCorp’s earnings and credit metrics will stay weak in 2021 with the extent and pace of recovery remaining uncertain for now.”
Noting that gaming revenue accounted for 95% of NagaCorp revenue and EBITDA in 2019 and 2020, Moody’s said it expects the company’s revenue to be weaker in 2021 than in 2020, “which will be equivalent to around 40% of its 2019 revenue before the coronavirus pandemic, even if the current suspension does not exceed three and a half months as in the previous year. This is because the company’s operating performance in the first quarter of 2020 was not significantly affected by the pandemic.
“Although the pandemic will likely delay NagaCorp’s earnings recovery to 2022, Moody’s expects the company to have sufficient liquidity to withstand its cash burn, which includes operating expenses, interest payments and maintenance capital spending.
“NagaCorp can also delay planned spending for the construction of an integrated casino and hotel complex in Vladivostok, Russia, and another integrated casino and hotel complex (Naga 3) in Phnom Penh, Cambodia, with no financial penalties.”
NagaCorp this week confirmed it was in the process of reducing its workforce as part of efforts to save up to US$2 million per month in run-rate operating costs, from around US$8.6 million prior to the suspension of operations on 1 March 2021 to US$6.6 million.
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