Ratings agency S&P Global Ratings has revised its outlook on Okada Manila operator Universal Entertainment Corp (UEC) to “Negative,” citing “weak casino performance” while affirming its “B-” Rating for its long-term issuer credit and senior debt.
In a Monday note, S&P Global indicated that Universal Entertainment’s “EBITDA has consistently fallen short of our expectations due to the weak performance of its casino resort business in the Philippines.” It further noted that “continuing stiff competition in the Philippines and rising inflation amid the Middle East war increase the likelihood of weak casino performance.”
Okada Manila saw Adjusted segment EBITDA fall by 55.7% in 1Q26 to JPY2.04 billion (US$12.9 million) after a 16% year-on-year downturn in net sales to JPY15.4 billion (US$97.2 million), with operating profit down 92.8% to JPY23 million (US$145,230).
Despite this, for 1Q26, Okada Manila’s parent company saw group-wide sales rise by 4.2% yearly, to JPY28.4 billion (US$179 million), boosted by strong results from its pachinko and pachislot segment. But S&P analysts indicate that “the recovery in the Japanese game machine business will not offset deterioration in the casino resort business.”
“We expect annual EBITDA to stabilize at around JPY16 billion (US$101 million) in the Japanese pachinko and pachislot machine business, which accounts for about half” of UEC’s business, noting that “sluggish performance of the casino resort business will likely outweigh the improvement.” S&P Global is now expecting EBITDA to remain “just below” JPY20 billion (US$126 million), falling short of its previous estimate of up to JPY25 billion (US$157 million).
The analysts further highlight “growing risk of liquidity deteriorating,” noting heavy interest charges of about JPY15 billion (US$94.3 million) per year, expecting UEC “will face an expenditure burden of around JPY9 billion (US$56.6 million) per year for capital renewal investments in the casino resort business.”
This causes the analysts to estimate free operating cash flow will “likely remain negative”, with an expected decline in cash and deposits on hand, saying it “may make it difficult for the company to refinance US$400 million due in August 2029.”
Despite this, S&P Global indicates that it does “not foresee” UEC “having any major cash flow problems in the coming few quarters.”
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