NagaCorp Ltd, a prominent casino operator listed in Hong Kong and operator of the NagaWorld casino resort in Phnom Penh, is grappling with financial uncertainties due to a significant revaluation of its stalled casino resort project in Primorye, near Vladivostok, Russia. The company has projected its first-half financial results will reflect these changes, showing either a modest profit or a loss, a stark contrast to last year’s robust earnings.
Financial repercussions of Vladivostok project:
In a recent disclosure to investors, NagaCorp reported that it might end the first half of the year with either a net profit of US$3.1 million or a net loss of US$6.9 million. This anticipated result deviates sharply from the US$83.0 million profit recorded in the same period the previous year. The primary cause of this financial fluctuation is attributed to the revaluation of the group’s development in Vladivostok, which has been independently assessed by a firm of valuers.
According to GGRAsia, the company stated: “Such impairment was due to an increase in the discount rate used for the purpose of determining the project present value and the lower business volume expected to be generated from the Vladivostok project. Notwithstanding the above information, the overall financial position of the group remains healthy. The expected impairment is unrealised and does not affect the operational cash flows of the group.”
The revaluation process indicated an expected impairment loss of approximately US$85 million to US$95 million for the Vladivostok project. This impairment is largely due to an increase in the discount rate used to determine the project’s present value and the lower business volumes anticipated from the venture.
Despite the potential setbacks from the Vladivostok project, NagaCorp reassures stakeholders of its stable financial condition. The casino operator emphasized that the forecasted impairment is unrealized and will not affect the operational cash flows of the group. This statement aims to maintain investor confidence by highlighting the company’s resilience and enduring financial health, even in the face of significant project impairments.
Strategic responses and market adjustments:
The revaluation and its implications come on the heels of NagaCorp’s decision in March 2022 to indefinitely suspend the Vladivostok development. This decision was driven by various uncertainties that allowed the company to invoke a force majeure clause in its investment agreement. The indefinite pause and ongoing ambiguity about the project’s resumption reflect broader challenges and strategic recalibrations for NagaCorp in the Russian market.
As Inside Asian Gaming reports, the Vladivostok project, initially set to enhance the local IR cluster alongside other developments like the Imperial resort by Diamond Fortune Holdings, has faced setbacks. Other operators in the area, such as Summit Ascent Holdings, have also paused expansion plans, indicating a wider trend of reevaluation and caution in the region.
As NagaCorp navigates through these financial and operational challenges, the industry watches closely. The outcomes of this revaluation will likely influence the company’s strategic decisions moving forward, particularly in how it manages international expansions and copes with fluctuating market conditions. In the upcoming months, stakeholders and market analysts will be keenly observing how NagaCorp adjusts its strategies in response to these financial revelations and what steps it takes to mitigate similar challenges in the future.