NagaCorp: Future Growth Driven By Positive Macroeconomic Trends And VIP Market Segment

Nov. 04, 2019 5:32 PM ETNagaCorp Ltd. (NGCRF)


  • We anticipate the company is well-positioned to take advantage of the increased number of visitors in Cambodia over the next couple of years.
  • NagaCorp has developed long-standing relationships with junket operators in the ASEAN region, which could contribute to the company's VIP market growth.
  • NagaCorp continues to commit paying a dividend payout ratio of 60%.
  • We recommend accumulating shares of this company if the price falls below HKD 14.30.


In our first article on NagaCorp (HK:3918) or (OTCPK:NGCRF), we will focus on the macroeconomic trends, Naga 2 project which was built back in late 2017 and the company's VIP market business. The company is currently up approximately 72% YTD and is trading at HK$14.26. In our view, the stock price currently seems fairly valued due to strong stock price outperformance compared to the wider HSI index. Nevertheless, our analysis suggests that NagaCorp's future operational performance will be driven by (1) higher number of tourists visiting Cambodia over the next couple of years, (2) better revenue outlook of NagaCorp and political environment regarding gaming business compared to Macau-located companies, (3) robust revenue growth rates and improved operational leverage of VIP market segment in the near future, (4) non-gaming revenue opportunities of Naga 2 project. We recommend that investors accumulate shares of this company as long as the company falls below HK$14.29.

Market Dynamics

According to the World Bank report, the Cambodian economy achieved a real GDP growth rate of 7.5 percent in 2018 up 50 bps y/y. Robust economic growth was primarily driven by healthy domestic consumer spending combined with stronger overseas exports to both the U.S. and European Union. However, the ongoing U.S. - China trade dispute is adversely affecting global trade trends leading to lower growth of export-reliant economies. Consequently, analysts from the World Bank team anticipate that the growth of the Cambodian economy is expected to decline to 7% in 2019.

(Source: CEIC data)

According to the figure above, the annual FDI inflow into the Cambodian economy amounted to over $3.0 billion in 2018, which makes up approximately 13% of GDP in 2018. In case our readers are not familiar with the term Foreign Direct Investments or FDI, it consists of all investments of foreign individuals or

This article was written by

I look at companies that are mispriced and grow at a reasonable pace. Most of the markets I look at are usually US companies that have exposure to the Asian markets. I believe many of these companies are mispriced and we have an opportunity to generate alpha from potential misconceptions.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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