CICC released a Research Report indicating that NAGACORP (03918.HK) saw a 18% year-on-year increase in total Gambling revenue for the first quarter of the 2025 fiscal year, recovering to 53% of the level seen in the same period in 2019. Among these, the mass market Gambling revenue led the recovery with a 24% year-on-year increase, recovering to 120% of the level in the same period of 2019; however, VIP Gambling revenue remains pressured, with a 17% year-on-year increase, only returning to 29% of the level in the same period of 2019.
However, NAGACORP's net Gambling revenue for the first quarter of fiscal year 2025 has already recovered to 92% of the level in the same period of 2019. The firm believes this is due to the gradually increasing revenue share of the high-margin mass market business, enhancing the quality of the company's revenue.
NAGACORP's management previously stated that they plan to restore dividends in the fiscal year 2025, but the amount of dividends may be influenced by the capital expenditures for the "Naga 3" construction project and the "NagaWorld" renovation plan. Management guided that capital expenditures for the fiscal year 2025 are expected to be around $70 million, mainly for the renovation of "NagaWorld" and the upgrade of gambling systems. The company anticipates a free cash flow of about $96 million in the fiscal year 2024. Therefore, CICC expects that the dividend payout ratio for the fiscal year 2025 could reach 60%.
Given that the recovery of NAGACORP's Gambling business may take longer, CICC has lowered its EBITDA forecast for the fiscal year 2025 by 25% and introduced an EBITDA forecast for the fiscal year 2026 at $0.393 billion. Additionally, CICC maintains a " outperforming the Industry" rating for NAGACORP, but has lowered the Target Price by 8% to HKD 4.4. (js/u)
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