Universal Entertainment revenue to rise 40% in 2023, analysts say

Fitch Ratings says Universal Entertainment’s outlook is stable.

The Philippines.- Fitch Ratings has reaffirmed its ‘stable’ outlook for Universal Entertainment (UE), predicting an increase of 40 per cent in the company’s revenue from integrated resort Okada Manila this year. Fitch then expects UE’s revenue to see more moderate expansion at around 20 per cent in 2024 and 2025.

Fitch analysts attribute the accelerated growth to the full operationalisation of Okada Manila in December 2021. The company, primarily involved in the gaming machine business and the operation of an integrated resort in the Philippines, has seen a significant contribution from domestic customers as international travel remained restricted due to the pandemic.

Despite surpassing pre-pandemic levels in 2022, the number of casino visitors for the year fell short of the figures recorded in 2019. However, Fitch anticipates a recovery in visitor numbers in 2023 to at least 2019 levels. This, coupled with increased spending per visitor, is expected to fuel growth this year.

The company recorded revenue of JPY35.50bn (US$261.5m) for the first quarter of 2023, up 28 per cent when compared to last year.

Fitch highlighted certain factors that contribute to the company’s weak business profile relative to its peers. These factors include UE’s single-asset IR operation, niche amusement equipment manufacturing and relatively smaller size.

The ‘stable’ outlook reflects Fitch’s confidence in UE’s ability to generate strong free cash flow (FCF) as operations stabilise, leading to a gradual reduction in leverage. However, the ratings agency notes that UE’s weak financial flexibility offsets some of the positive developments. It says ongoing legal disputes concerning the takeover of the property by Kazuo Okada and associates in May of last year also pose a risk to UE’s corporate governance and potential access to funding.