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Union Gaming has reiterated its “buy” rating on NagaCorp. following a recent trip to Cambodia, where the hotel, gaming and leisure operator is based.
In a report on the company incongruously titled “Gaga for Naga,” the usually sedate research firm said Naga should deliver “above-consensus results over the next few years.”
“In our view, shares of Naga have been unfairly penalized (down 35 percent from the March 2014 peak) as they have been lumped in with other Asian gaming equities in the Macau downturn,” Union wrote. “Unlike operators in Macau and certain other regional Asian gaming jurisdictions, we expect Naga to post continued strong and stable growth across all of the primary gaming segments?including VIP?over the near, medium, and long terms.”
Union estimates EBITDA of US$211 million in 2015 and US$255 million in 2016, 4 percent and 9 percent higher than the consensus. “We have a high degree of confidence that not only will Naga meet our expectations based on ongoing operations, but will likely well exceed them (by many tens of millions of dollars) thanks to concession renewal fees for the two major slot vendor contracts that are expiring later in 2015 and in early 2016, respectively,” the firm said.
Naga also has “growth drivers as far as the eye can see” in the VIP, mass-table and slots/ETG markets. It also pointed to new developments in Phnom Penh and Vladivostok as indicators of current and future sustainability and profitability.
“The expansion projects in Phnom Penh are moving forward,” Union analysts wrote. The initial phase of construction on NagaCity Walk is effectively complete, putting the project on track to open in early 2016. The Naga2 casino “is on pace to delivery to the company in 2017, with operations commencing by late 2017,” they wrote.
“Finally, we expect the company to formally break ground in Vladivostok, Russia in the very near term, and would expect operations to commence on this US$150 million project (Phase 1) by early 2018.”
