Revenues at Philippines integrated resort Okada Manila are expected to reach 80% of pre-pandemic levels this year before returning to 100% in 2023 as operations stabilize, according to Fitch Ratings.
The ratings agency this week upgraded parent company Universal Entertainment Corp’s Long-Term Issuer Default Rating (IDR) from “CCC+” to “B-” with a stable outlook, which it said reflects its expectation that the company will steadily improve cash flow generation as operations at Okada Manila “continue to stabilize and recover to at least the levels before the COVID-19 pandemic affected its business.”
The upgrade also reflects the successful refinancing of Universal’s debt due in 2021, which shows its access to the debt-capital market, Fitch said.
“We are assuming IR revenue will be around 80% of the pre-pandemic level in 2022 before recovering almost fully in 2023, broadly in line with our assumptions for comparable global casino markets,” it explained.
“Universal’s Manila IR business has not been operating at its full scale and has not been receiving a significant volume of international travelers due to the pandemic, with domestic customers driving the recent recovery.”
Fitch said it expects revenue at Okada Manila to rise 30% in 2022 and another 14% in 2023. It also has high hopes for Universal’s pachinko machine segment, despite maintaining a cautious outlook due to uncertain end-market demand amid a delay in the cycle of machine replacement at pachinko halls and potential production constraints caused by the global chip shortage.
“Still, the segment is financially self-sufficient and it has paid for the construction and funding needs of the IR business,” Fitch said.
“However, its performance has been volatile and, to some extent, unpredictable. Fitch forecasts Universal’s amusement-equipment segment revenue in 2022 will recover to 2020’s level, which was the peak in the past four years.”
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