The bank expects the number of travelers to Cambodia to further increase, which may drive the development of the company's Business.
According to Zhitong Finance APP, CICC released a Research Report stating that, given that NAGACORP's Gambling business recovery may take longer, the firm has reduced the company's 2025 EBITDA forecast by 25% to 0.329 billion dollars and introduced a 2026 EBITDA forecast of 0.393 billion dollars. The company is currently trading at 5 times the 2025 EV/EBITDA. The firm maintains an outperform rating for the Industry, but due to lowered profit forecasts and adjustments to the Industry valuation center, it has reduced the Target Price by 8% to 4.40 HKD, corresponding to 7 times the 2025 EV/EBITDA.
China International Capital Corporation's main viewpoints are as follows:
The Sector of mid-market is leading the company's recovery trend.
NAGACORP recently announced its 1Q25 quarter Gambling operation data. Total Gambling revenue in 1Q25 reached 0.171 billion dollars, an increase of 18% year-on-year, recovering to 53% of 1Q19. Among them, the mass market Gambling revenue led the recovery, growing by 24%, returning to 120% of 1Q19 level; VIP Gambling revenue remains under pressure, increasing by 17%, but only recovering to 29% of 1Q19 level. However, the company's net Gambling revenue in 1Q25 has recovered to 92% of 1Q19, reaching 0.148 billion dollars, which the firm believes is due to the increasing proportion of high-margin mass market business revenue, improving the quality of the company's income.
The number of travelers to Cambodia is expected to grow, boosting the mass market business.
In February 2025, the total number of travelers to Cambodia and the number of travelers from China to Cambodia recovered to 109% and 49% of the levels in the same period of 2019, respectively. Considering that: 1) the frequency of direct flights to Cambodia is gradually increasing, and 2) the new airport in Phnom Penh is scheduled to be operational in July 2025, the firm expects that the government will likely promote the new airport's volume, and anticipates that the number of travelers to Cambodia will further increase, which may drive the development of the company's mass market business.
It is expected that dividends will be reinstated in 2025.
Management stated that the company plans to reinstate dividends in 2025, but the amount may be affected by the capital expenditures for the Naga 3 construction project and the NagaWorld renovation plan. Management guidance indicates that capital expenditures in 2025 are expected to be approximately 70 million USD, mainly for the renovation of NagaWorld and upgrades to the Gambling system. The company's free cash flow for 2024 is about 96 million USD. Therefore, the bank expects that the dividend payout ratio in 2025 may reach 60%.
Risk Warning: Intensified regional competition; the recovery of travelers to Cambodia is slower than expected.
