NagaCorp Q1 operating figures top forecasts on strong VIP

Sunday 2nd of April 2017

Hong Kong-listed NagaCorp recorded a 34 percent increase in VIP rollings for the first three months of 2017, according to the company’s latest filing to the Hong Kong Stock Exchange.

VIP Business (rollings) was US$3.7 billion, compared to US$2.8 billion in 2016.

Mass table buy-ins increased 13 percent to US$169.4 million for the first three months of 2017, while EGM bills-in increased 10 percent to US$417.3 million for the first three months of 2017.

"Ultimately, we believe the VIP volume reported in 1Q17 significantly exceeded consensus, which was likely expecting a decline in VIP volume on a y/y basis owing not only to the tough comparison, but the fact that the rolling back of junket incentives would impair total volumes (but be offset by notably higher gross profit margin)," Union Gaming wrote in a note. "In addition, the departure of Macau's Jimei junket at the end of January clearly didn't impact volumes. Finally, seeing VIP volumes growing nicely at the capacity-constrained NagaWorld casino gives us a higher degree of confidence in Naga2, which should open later this year."

The firm said it's raising its VIP volume expectations following the strong 1Q17 numbers although leaving some headroom on the GGR side to account for the luck factor.

"Our full-year VIP volume forecast, which includes a modest contribution from Naga2, goes to +20 percent (from +13 percent). We are maintaining our full-year mass / slots forecasts as-is (+11 percent and +15 percent, respectively). As a result of our VIP change, our 2017 EBITDA forecast goes to US$274mm (+$1.5mm) and 2018 goes to $387mm."

Last week it was announced that founder, controlling shareholder and CEO of Nagacorp, Tan Sri Dr. Chen Lip Keong was looking to gain full control of the casino operator by exercising conversion rights in respect of the TSCLK Complex Convertible Bonds.

According to the company's filing to the Hong Kong Stock Exchange, the move would result in Dr. Chen increasing his interest in the company from approximately 39.98 percent to approximately 61.13 percent.

The conversion of the bonds is subject to the granting of the Whitewash Waiver by the executive director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong, as well as approval by the independent shareholders with regards to the conversion of the TSCLK Complex Convertible Bonds, which will be decided at the EGM.

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