The free cash flow (FCF) profile of the Mohegan Inspire Entertainment Resort, a newly opened Korean casino complex in the Mohegan Tribal Game Administration, will be “changed positively” by the venue’s “third year of operation,” which means it will increase its business faster than its Incheon-based rival Paradise City.
It follows a newly published study by CBRE Capital Advisors Inc on the credit outlook of a number of casino businesses, including investments in Asia, after the financial institution recently initiated such reporting on the sector.
U.S.-based Mohegan, which trades as Mohegan Gaming & Entertainment, is making its first foray out of North America through a Korean project near Incheon International Airport.
The $1.6 billion Mohegan Inspire’s non-gaming facility, including the 15,000-seat Inspire Arena, opened on Nov. 30 and a foreigner-only casino opened on Feb. 3. The facility had its official launch ceremony on Mar. 5.
On the Mohegan Inspire, CBRE analysts Colin Mansfield and Conor Parks said, “Our initial forecast is generating mature EBITDA of approximately $150 million [earnings before interest, taxation, depreciation and amortization per year], with margins below 30%, and sufficiently covering debt services through increases. That’s equivalent to a ROI [return on investment] of approximately 10% at maturity.”
They added: “Due to the phased opening and impressive slate of off-game amenities, properties may grow faster than their direct competitor Paradise City.”
CBRE analysts believe the Mohegan Inspire could outperform Paradise City given it has “more focus on slots and a bigger room base.”
The report expected Mohegan Inspire’s “mature” slot and one-day multipliers per table unit to be $275 and $3,000, respectively, in line with the average for Asian countries except Macau and Singapore.
The latter two markets far outperform other Asian casino operator rivals in South Korea, the Philippines, Malaysia and Cambodia in both daily slot and table-by-table multipliers, according to CBRE.
CBRE said Mohegan Inspire’s free cash flow profile “should turn positive by year three of operations, but in the meantime it must have sufficient resources to finance debt repayment and maintenance capital expenditure.”
The project had access to approximately $179 million in cash as of December 31, 2023, and was “set at construction costs and pre-opening costs.”
However, analysts warned: “South Korea’s capital structure will be challenged by a 17 per cent PIK [in-kind payment] mezzanine term loan, which could breach total net leverage contracts (including both project level and holding company debt).”
The outstanding portion of the 17% of PIK Korea regular loans is US$389 million and has a maturity of June 2027.
BY: 실시간경마사이트